New Delhi: The Reserve Bank of India (RBI), on Friday, announced that it will carry out the second round of Open Market Operation (OMO) purchases, involving government securities worth Rs 50,000 crore, on December 18. According to the Central bank, the auction will be held on December 18 between 9:30 and 10:30 a.m. through its core banking solution platform, E-Kuber.
The RBI said the auction results will be published the same day. Successful bidders must ensure that the required securities are available in their Subsidiary General Ledger accounts by 12 p.m. on December 19. The purchase will cover several benchmark securities, including 6.75 per cent GS 2029, 6.10 per cent GS 2031, 6.54 per cent GS 2032, 7.18 per cent GS 2033, 6.33 per cent GS 2035, 7.23 per cent GS 2039 and 7.09 per cent GS 2054, according to RBI.
OMO purchases are typically used by the RBI to inject durable liquidity into the banking system and help. Earlier, the RBI on Wednesday bought government bonds worth Rs 50,000 crore from the market in order to infuse more liquidity in the banking system to spur growth in the economy. The purchase is part of the RBI's monetary policy announcement last week to inject Rs 1 lakh crore in the market via the purchase of government securities and another $5 billion equivalent via a foreign exchange swap facility.
The RBI has been selling US dollars in the market to prevent the rupee from going into a free fall, which has resulted in a lot of cash being sucked out of the banking system, which also tends to lead to an increase in interest rates in the market. Reserve Bank Governor Sanjay Malhotra said on Friday that the RBI will ensure sufficient liquidity in the banking system without explicitly targeting surplus levels of around 1 per cent of net demand and time liabilities (NDTL).
"Monetary transmission is happening, and we will provide sufficient liquidity to support it," he said. Malhotra said that current liquidity in the banking system sometimes exceeds one per cent of NDTL, ranging between 0.6 per cent and 1 per cent, occasionally going higher. "The exact number, whether 0.5, 0.6, or 1 per cent, should not matter. What is important is that banks have enough reserves to function smoothly," he added.
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