RBI to conduct OMO purchase on March 10

By: | Published: March 5, 2016 2:18 AM

The Reserve Bank of India (RBI) on Friday announced open market operation (OMO) purchases of government securities worth Rs 15,000 crore on March 10.

The Reserve Bank of India (RBI) on Friday announced open market operation (OMO) purchases of government securities worth Rs 15,000 crore on March 10.

The RBI conducts OMO purchases in order to infuse liquidity into the system whenever there is a deficiency, while it conducts OMO sales to suck excess liquidity from the system. OMOs are also intended to keep the short-term interest rates close to the policy rate.

The central bank has notified six different securities for the OMO purchase — 7.83% GS 2018, 8.12% GS 2020, 8.83% GS 2023, 7.72% GS 2025, 8.28% GS 2027 and 7.88% GS 2030.

The liquidity deficit in the banking system has been around Rs.1.5 trillion over the past two months, mainly because of the build-up of the government’s cash balance with RBI. The central bank’s foreign exchange interventions in the recent past have also increased the deficit.

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