MUMBAI: The Reserve Bank of India (
RBI) on Monday announced that it will inject Rs 36,000 crore
liquidity into the system through purchase of government bonds in October to meet the festival season demand for funds.
The auctions to purchase government bonds as part of the Open Market Operations (OMO) to manage liquidity in the system will be conducted in the second, third and fourth week of October.
"Based on an assessment of the durable liquidity needs going forward and the seasonal growth in currency in circulation observed in build-up to the festive season, RBI has decided to conduct purchase of Government securities under OMOs for an aggregate amount of Rs 360 billion in the month of October," the central bank said in a release.
The auctions, it further said, "would be conducted during the 2nd, 3rd and 4th week of October. The auction dates and the Government securities to be purchased in respective auctions would be communicated in due course".
The benchmark 10-year bond yield dropped as much as 12 basis points to 7.90 per cent in opening deals, its lowest level since Aug. 29. By 11.05 am however, it was down 7 basis points at 7.95 per cent. "Markets are cheering after a long time. The cut in borrowing and the (bond buying)
open market operation have both helped equally," said Harish Agarwal, a fixed income trader with First Rand Bank in Mumbai. "But I fear profit booking will keep it between 7.95-8.00 percent levels," he added.
The RBI said that its assistance plan followed an assessment of "durable liquidity" needs and the seasonal growth in currency in circulation ahead of upcoming holiday celebrations.
