RBI to conduct sale, purchase of Govt securities worth Rs 20,000 crores

The Reserve Bank of India (RBI) has announced the sale and purchase of government securities worth Rs 20,000 crore under open market operations.

New Delhi:The Reserve Bank of India on Tuesday said it will conduct two open market operations (OMOs) of Rs 10,000 crore each for sale and purchase of the government securities worth Rs 20,000. The RBI said the first operation will be conducted on Thursday while the second operation of Rs 10,000 crore will be conducted on September 3.

“On a review of current and evolving liquidity and market conditions, the Reserve Bank has decided to conduct simultaneous purchase and sale of government securities under Open Market Operations (OMO),” RBI said in a statement issued on Tuesday.

The Central Bank said that it would keep track of evolving liquidity and market conditions and will take appropriate measures to ensure smooth functioning of financial markets.

The Reserve Bank said these two tranches of open market operations will be conducted using multiple price auction method.

In the first auction, there will be four dates for maturity of the government securities, November 2024, February 2027, May 2030 and August 2032 having the interest rates of 6.18%, 8.24%, 5.79% and 7.95% respectively.

The RBI did not share the security-wise value of these four securities that will form the part of Thursday’s open market operation.

The central bank said eligible participants should submit their bids in electronic format on the Reserve Bank of India Core Banking Solution (E-Kuber) system between 10:00 am and 11:00 am on August 27, 2020.

The results of the auction will be announced the same day and the successful firms are required to have funds in their designated bank accounts by 12 noon of the next day.

The bank will also conduct a simultaneous sale operation of short-term securities worth Rs 10,000 crore the same day using the multiple price auction method.

In this case too, the Reserve Bank did not provide the details of security-wise notified amount, having an aggregate value of Rs 10,000 crores.

These short term securities to be sold by the Reserve Bank will mature between October 15 to November 6, 2020.

The bank said it will decide the quantum of purchase and sale of individual securities and it also reserves the right to accept bids for less than the aggregate amount.

The Bank will separately announce the details of the securities for the second tranche auction to be held on September 03.

(Article by Krishnanand Tripathi)