RBI to conduct Rs 20,000 crore OMO next week

While keeping interest rates unchanged, the Reserve Bank of India (RBI) on Friday said it will purchase government securities under open market operations (OMO) for an aggregate sum of Rs 20,000 crore on October 15.

RBI Governor Shaktikanta Das said the central bank will maintain comfortable liquidity conditions and will conduct market operations in the form of outright and special open market operations.

The central bank added that it reserves the right to decide on the quantum of purchase or sale of individual securities, accept bids for less than the aggregate amount, purchase marginally higher or lower than the aggregate amount due to rounding off and to accept or reject any or all the bid either wholly or partially without assigning any reasons.

In another update, the RBI decided to keep benchmark interest rate unchanged at 4 per cent but maintained an accommodative stance, implying more rate cuts in the future if the need arises to support the economy hit by the Covid-19 crisis.

The benchmark repurchase (repo) rate has been left unchanged at 4 per cent, Governor Shaktikanta Das said while announcing the decisions taken by the central bank's Monetary Policy Committee (MPC).

Consequently, the reverse repo rate will also continue to earn 3.35 per cent for banks for their deposits kept with RBI.

He said MPC voted for keeping interest rate unchanged and continued with its accommodative stance to support growth.

The 25th meeting of the rate-setting MPC with three new external members -- Ashima Goyal, Jayanth R Varma and Shashanka Bhide -- began on October 7. This is the maiden meeting of the new members who were appointed just a day before the meeting for a term of four years.

Commenting on the policy, Amar Ambani, Senior President and Institutional Research Head, YES Securities said, “RBI’s status quo on rates was along expected lines, given the elevated inflation. Rationalization of risk weights on individual housing loans, now linked only to LTVs, for all new housing loans sanctioned till March 2022, is a positive for banks. We see a possibility of the further scope of 25-50 basis points cut in repo policy rates.”

Abhimanyu Sofat, Head of Research, IIFL Securities said, “Despite not cutting benchmark interest rate, RBI has announced a significantly dovish monetary policy will slew of measures. Doubling the size of open market operations to Rs. 20,000 crore, RBI participation in state development loans, allowing co-origination of loans by HFCs are combined big-ticket announcements for both bond market and financial sector stocks.”