RBI Announces OMO Purchase of Government SecuritiesBy RBI
Tuesday, November 2, 2010
The liquidity adjustment facility (LAF) window of the Reserve Bank has remained in an injection mode since September 9, 2010. The average daily net injection of liquidity through LAF was ` 61,700 crore in October 2010 with a peak injection of ` 1,28,685 crore on October 30, 2010. With a view to alleviating frictional liquidity pressure, the Reserve Bank on October 29, 2010 announced two liquidity easing measures viz., conducting second LAF (SLAF) and allowing scheduled commercial banks to avail of additional liquidity support under the LAF to the extent of up to 1.0 per cent of their NDTL as on October 8, 2010. These measures have been extended up to November 4, 2010.
The Reserve Bank in its Second Quarter Review of Monetary Policy released today has stated that even though a liquidity deficit is consistent with an anti-inflation stance, excessive deficit can be disruptive to both financial markets and to credit growth in the banking system. To ensure that economic activity is not disrupted by liquidity constraints, the liquidity deficit needs to be contained within a reasonable limit.
Consistent with the stance of monetary policy and based on the current assessment of prevailing and evolving liquidity conditions, the Reserve Bank has decided to conduct purchase of the following government securities under its open market operations (OMO) for an aggregate amount of Rs 12,000 crore through multi-security auction using the multiple price method:
The auction shall be conducted by the Reserve Bank of India, Mumbai Office, Fort, Mumbai on November 4, 2010.
Market participants may take note of the following:
There is an overall aggregate ceiling amount of ` 12,000 crore for all the securities in the basket put together. There is no security-wise notified amount.
RBI reserves the right to:
• Decide on the quantum of purchase of individual securities
Offers in the prescribed form obtainable from the Regional Director, Reserve Bank of India, Mumbai Office, Fort, Mumbai-400001 and/or RBI website www.rbi.org.in (www.rbi.org.in/) should be submitted to that Office on November 4, 2010. The NDS members should submit their competitive offers in electronic format using Open Market Operation (OMO) module of NDS. All offers should be submitted by 12.30 P.M.
The result of the auction will be announced on the same day and payment to successful offerers will be made during banking hours on November 8, 2010. Successful offerers may note to make available the requisite amount of securities in their SGL account in the forenoon on November 8, 2010.
Press Release : 2010-2011/613