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Last Update: Mon, May 21, 2012 7:36 AM IST (2:06 AM GMT)
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New Delhi: The Reserve Bank of India (RBI) will buy government securities worth Rs 120 billion through open market operations on Friday, February 24, 2012, to increase liquidity in the banking system.
"The Reserve Bank has decided to conduct open market operations by purchasing the following government securities for an aggregate amount of Rs 12,000 crore (Rs 120 billion) on February 24, 2012," it said in a notification Wednesday.
The central bank will buy four government securities, namely, 8.07% GS maturing in 2017, 8.79% GS maturing in 2021, 8.28% GS maturing in 2027 and 8.28% GS maturing in 2032.
The open market operation will be conducted through multi-security auction using the multiple price method, it said.
"There is an overall aggregate ceiling of Rs 12,000 crore (Rs 120 billion) for all the securities in the basket put together. There is no security-wise notified amount," the banking regulator added.
Negotiated dealing system (NDS) members have to submit their competitive bids for the auction in an electronic format using open market operation module of NDS by 12:30 pm on February 24, 2012.
The result of the auctions will be announced on the same day and payment to successful bidders will be on February 27, 2012.
Earlier December, RBI Deputy Governor Subir Gokarn had said that conducting open market operations will be the central bank's first preference for liquidity injection to ease depreciation in the value of Indian rupee.
The open market operation is in line with the RBI's mid-quarterly monetary policy review released on December 16, in which it had said that such operations will be conducted as and when considered appropriate based on evolving liquidity condition.
Further, in the past few weeks, the RBI has reiterated several times that the open market operation will be kept open to ease liquidity crunch even as it cut cash reserve ratio (CRR) -- the proportion of deposits that commercial banks must keep with the central bank -- by 50 basis points for the same purpose.
Roughly, the central bank has conducted OMOs aggregating close to around Rs 906.7 billion since November, 2011.
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The Reserve Bank of India (RBI) is India's central banking institution, which controls the monetary policy of the Indian rupee. It was established on 1 April 1935 during the British Raj in accor ...
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