The Reserve Bank of India announced that it will buy Rs 10,000 crore in Open Market Operations (OMO) in State Development Loans (SDLs) on 22nd of October.
Depending on the market response, the size may be increased with subsequent auctions. This move is being done to improve liquidity and facilitate efficient pricing during the current financial year.
The purchase will happen through a multi-security action by using the multiple price method. The Reserve Bank of India reserves the right to decide on the amount of purchase, accept bids for less than the aggregate amount, etc.
The central bank resorts to sale of government securities when it feels that there is excess liquidity in the market. In case of liquidity crunch, it buys securities to maintain stability in the market.
Based on a review of the current liquidity and financial conditions, the RBI conducts open market operations to ensure that all market segments remain liquid and stable, and function normally.
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