Mumbai: The Reserve Bank of India (RBI) on Wednesday announced it would purchase government securities worth Rs 10,000 crore through open market operations in a bid to increase liquidity and enhance confidence in the market amid the coronavirus crisis.
In a statement, the RBI said that with the heightening of Covid-19 pandemic risks, certain financial market segments have been experiencing a tightening of financial conditions as reflected in the hardening of yields and widening of spreads.
"It is important to ensure that all market segments remain liquid and stable, and function normally.
"On a review of the current liquidity and financial conditions, the Reserve Bank has decided to conduct open market operations on March 20, 2020 (Friday) in the form of purchase of an aggregate amount of Rs 10,000 crore of the following Government securities through a multi-security auction using the multiple price method."
Under the scheme, the RBI will purchase government securities maturing in between 2022 and 2025. The securities were issued with a coupon rate of 8.2 per cent, 7.37 per cent, 7.32 per cent and 7.72 per cent.
Read more:Government to borrow Rs 51,000 crore more in March
The RBI statement said: "There is no notified amount against any of these securities within the aggregate ceiling of Rs 10,000 crore set for the operation."
"The central bank reserves the right to decide on the quantum of purchase of individual securities, accept offers for less than or higher than the aggregate amount of Rs 10,000 crore and also to accept or reject any or all offers either wholly or partially without assigning any reason," it added.
As coronavirus fears continue to rattle financial markets across the world and concerns have been raised over the economic impact of the pandemic, the RBI on Monday said it is ready to take measures required to calm the markets and improve liquidity.
RBI Governor Shaktikanta Das announced on Monday that the apex bank would conduct a six-month swaps worth $2 billion to provide liquidity to the foreign exchange market and conduct more long term repo operations (LTROs).
The central bank, however, did not go ahead with a much-anticipated emergency rate cut. Das said that rate cut decisions are taken by the Monetary Policy Committee (MPC), however, nothing should be ruled out.
RBI receives Rs 27,096 cr bids in 5th LTRO
RBI also said that it has received Rs 27,096 crore worth of bids in the fifth long-term repo operations (LTROs) conducted for an amount of Rs 25,000 crore with a tenure of three years.
Earlier this week, the RBI had announced to conduct additional LTROs for up to a total amount of Rs 1 lakh crore at the policy repo rate after reviewing the current financial conditions and to further improving monetary transmission.
The central bank received 21 bids in Wednesday's LTRO which has a reversal date on March 17, 2023.
"The total bids received amounted to Rs 27,096 crore, implying a bid to cover ratio (i.e. the amount of bids received relative to the notified amount) of 1.1," it said in a release.
The RBI allotted an amount of Rs 25,012 crore, with a pro-rata allotment percentage to 92.27 per cent.
(PTI and IANS Report)
