Updated: May 10, 2016 2:09:35 am
The Reserve Bank of India (RBI) will conduct open market operations (OMO) purchase of government securities worth R10,000 crore on Tuesday.
The central bank will be conducting auctions to purchase five government securities (G-sec) — 7.28 per cent G-sec 2019, 7.16 per cent G-sec 2023, 7.72 per cent G-sec 2025, 8.26 per cent G-sec 2027, and 9.20 per cent G-sec 2030.
OMO purchases are undertaken to ease liquidity in the system while OMO sales are done to remove excess liquidity.
The RBI has been conducting OMO purchases in a significant manner since the last few months, especially in March, when the system was witnessing considerable crunch in liquidity.
However, in recent times, liquidity conditions seem to have eased, which is evident from the fact that call money rates have remained low. The call rate last week fell to almost three-year low of 6.337 per cent.
The call rate is the rate at which banks lend overnight money to each other, and any surge in this rate is a reflection of a possible lack of liquidity in the system. In the April monetary policy, the central bank had introduced a slew of measures to ease liquidity in the system. The RBI said it would progressively lower the average ex-ante liquidity deficit in the system to a position closer to neutrality. The regulator has been keeping the liquidity shortfall equivalent to 1per cent of banks’ net demand and time liabilities (NDTL). FE
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