Liquidity booster: RBI to inject Rs 8,000 cr via bonds

Mumbai: The Reserve Bank of India today said it will sell bonds worth Rs 8,000 crore next week under the open market operations (OMO) to inject liquidity in the system.

“The RBI is conscious of the need to keep the system adequately supplied with liquidity, as we indicated in a statement recently, so that productive sectors are well supplied with credit,” RBI Governor Raghuram Rajan said in Mumbai.[caption id=“attachment_1228287” align=“alignleft” width=“380”] The RBI logo. Reuters[/caption]

While borrowing from the Marginal Standing Facility (MSF) has come down substantially after the RBI extended the term repo window, market interest rates suggest some liquidity tightness, he said.

Last month, RBI brought down the cost of short-term funds for banks by slashing the marginal standing facility (MSF) rate by 0.25 percent to 8.75 percent.

“To alleviate this tightness, we propose to conduct OMOs. On next Monday (18 November), we will undertake an OMO for Rs 8,000 crore,” he said.

As part of OMO auction, the RBI will sell four government papers maturing between 2015 to 2025.

The RBI reserves the right to decide on the quantum of purchase of individual securities and accept less than the aggregate amount of Rs 8,000 crore, central bank said in a statement.

It can also accept or reject any or all of the offers either wholly or partially without assigning any reason.

The result of the auction will be announced on the same day and payment to successful offerers will be made on 19 November 2013, it added.

Meanwhile, the government has preponed the scheduled auction of four dated securities worth Rs 15,000 crore to 14 November from 15 November.

The decision has been taken as 15 November has been declared as holiday on account of Muharram.

PTI