The Reserve Bank of India (RBI) announced on Monday that it will buy back securities worth Rs 40,000 crore on May 30. The buyback involves four government bonds with maturity dates in the second half of 2024.
“There is no notified amount for the individual securities within the aggregate ceiling of Rs 40,000 crore. Auction for securities will be conducted using the multiple price method,” the central bank said in a statement.
Auction results will be announced on May 30, while the settlement will occur on May 31, according to the RBI.
This will be the fourth buyback by the RBI, after its previous three attempts did not yield desired results. In the three buybacks conducted this month, the central bank managed to repurchase only Rs 17,849 crore, significantly falling short of the Rs 1.6 trillion target.
In an effort to inject liquidity into the banking system, the RBI conducted a 4-day variable rate repo (VRR) auction on Monday, receiving bids worth Rs 97,885 crore from banks against the notified amount of Rs 75,000 crore, reflecting high demand for cash amid tight liquidity conditions. Banks borrowed the amount at a weighted average rate of 6.54%.
The system liquidity deficit, as measured by net injections under the liquidity adjustment facility, is hovering around Rs 2 trillion. According to RBI data, the liquidity deficit reached Rs 1.98 trillion on May 25, up from Rs 2.32 trillion on May 23, Rs 1.48 trillion on May 20, and Rs 1.3 trillion on May 19.
The average system liquidity slipped into a deficit of Rs 1.2 trillion for the first 15 days of May, compared to a surplus of Rs 20,240 crore in April.