RBI to do open market operation (OMO) in state securities on Dec 23

This is the third OMO exercise in SDLs; to raise Rs10,000 cr

MUMBAI/December 17-2020: The Reserve Bank of India (RBI) will be conducting another purchase auction of state development loans (SDLs) or state securities under Open Market Operations (OMOs) for an aggregate amount of Rs10,000 crore on December 23, 2020.

RBI has called on the eligible participants to submit their bids in electronic format on the Reserve Bank of India Core Banking Solution (E-Kuber) system between 10 am and 11 am on December 23, 2020..

Though the OMO has long been done in central government securities (G-Secs), it was only in October, 2020, RBI debuted the OMO in SDLs, covering all States/UTs.

At present, like G-Secs, SDLs are eligible collateral for Liquidity Adjustment Facility (LAF) along with T-bills, dated government securities and oil bonds.

The open market operations (OMOs) in SDLs will be done as a special case during the current financial year for a basket of SDLs comprising securities issued by states

RBI said the OMO exercise is aimed at improving liquidity and facilitating efficient pricing in SDLs..

So far, through two OMO exercises, RBI has already done it for a cumulative amount of Rs20,000 crore. The Reserve Bank will purchase the SDLs through a multi-security auction using the multiple-price method.

There is no security-wise notified amount.

The Reserve Bank said it reserves the right to decide on the quantum of purchase of individual securities; accept bids for less than the aggregate amount; purchase marginally higher/lower than the aggregate amount due to rounding-off and accept or reject any or all the bids either wholly or partially without assigning any reasons.

 

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