The
Reserve Bank of India (RBI) will pump Rs 10,000 crore into the market on Wednesday by buying government securities to ease the liquidity situation.
The RBI said that the liquidity conditions are undergoing some stress in the recent period primarily due to build-up of cash balances on the government.
The assessment suggests that the strain on the market liquidity is likely to remain enduring in view of the fiscal targets set for the year as well as projections for aggregate credit growth, it said.
"Accordingly, the RBI Bank has decided to conduct Open Market Operations by purchasing the following government securities for an aggregate amount of Rs 10,000 crore on January 22, 2014 (Wednesday)," the regulator said.
As part of the OMOs, the RBI will purchase government securities maturing in 2017, 2019, 2023 and 2027.
The auction, it added, would be held through the multi-security auction using the multiple price method. OMOs are the market operations conducted by the RBI by way of sale/purchase of government securities to/from the market with an objective to adjust the rupee liquidity conditions in the market on a durable basis.
If there is excess liquidity, the RBI resorts to sale of securities and attempts to suck out the rupee liquidity.
Similarly, when the liquidity conditions are tight, the RBI buys securities from the market, thereby releasing liquidity into the market.
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