The central bank had decided to conduct OMOs in SDLs as a “special case” during the current financial year with an aim to improve liquidity and facilitate efficient pricing.
“It has been decided to conduct a purchase auction of SDLs under Open Market Operations (OMOs) for an aggregate amount of Rs 10,000 crores on October 22, 2020, keeping in view that this is the first-ever OMO purchase of SDLs,” it said.
Depending on market response, the size of the auctions may be enhanced in the subsequent auctions, it added.
At present, SDLs are eligible collateral for the Liquidity Adjustment Facility (LAF) along with T-bills, dated government securities and oil bonds.
The OMOs will be conducted for a basket of SDLs comprising securities issued by states.
The RBI will purchase the SDLs through a multi-security auction using the multiple price method. The result of the auction will be announced on October 22 itself.