RBI to inject Rs 8,000 cr liquidity through purchase of government securities on 22 Nov

Mumbai: The Reserve Bank of India (RBI) said on Monday it will inject Rs 8,000 crore into the system through the purchase of government securities on 22 November. [caption id=“attachment_5129811” align=“alignleft” width=“380”]  Reserve Bank of India. Reuters[/caption] “Based on an assessment of prevailing liquidity conditions and also of the durable liquidity needs going forward, the RBI has decided to conduct the purchase of the following government securities under Open Market Operations for an aggregate amount of Rs 80 billion on 22 November 2018 (Thursday)…,” it said in a statement. The OMO operation will help ease tight liquidity situation triggered by a series of default by group companies of IL&FS. The eligible participants should submit their offers in electronic format on the Reserve Bank of India Core Banking Solution (E-Kuber) system on 22 November. The RBI had earlier stated that the system liquidity will move into deficit in the second half of 2018-19 and the evolving liquidity conditions would determine its choice of instruments for both transient and durable liquidity management. As part of the OMOs, the RBI will purchase government securities maturing in 2021 bearing an interest rate of 7.80 percent, 2024 (8.40 percent), 2026 (8.33 percent), 2028 (8.60 percent) and 2032 (8.28 percent). The RBI said it has the right to decide on the quantum of purchase of individual securities and can also accept offers for less than Rs 8,000 crore. It may as well purchase marginally higher than the aggregate amount due to rounding-off effect, it said, adding it can also accept or reject any or all the offers either wholly or partially without assigning any reason. OMOs are the tools which can be used to either inject or drain liquidity from the system. It is employed to adjust rupee liquidity conditions in the market on a durable basis. If there is excess liquidity, the RBI resorts to sale of securities and sucks out the rupee liquidity. Similarly, when the liquidity conditions are tight, it buys securities from the market, thereby releasing money into the market.