The Reserve Bank of India today said it will buy government securities worth Rs 10,000 crore (US$ 1500 Million) under the open market operations (OMOs) on June 20 to infuse liquidity into the system.
“Based on the current assessment of prevailing and evolving liquidity conditions, the Reserve Bank has decided to conduct purchase of Government securities under Open Market Operations for an aggregate amount of Rs 100 billion on June 20, 2016”, the central bank said a statement. As part of the OMOs, RBI will purchase government securities maturing in 2020 (bearing interest rate of 8.27 per cent), 2024 (8.40 per cent), 2027 (8.24 per cent), 2030 (7.88 per cent) and 2032 (8.32 per cent). There is an overall aggregate ceiling of Rs 100 billion for all the securities in the basket put together, RBI added. OMOs are market operations conducted by RBI by way of sale/purchase of government securities to/from the market with an objective to adjust the rupee liquidity conditions in the market on a durable basis.
If there is excess liquidity, RBI resorts to sale of securities and sucks out the rupee liquidity. Similarly, when the liquidity conditions are tight, RBI buys securities from the market, thereby releasing liquidity into the market.