RBI to conduct auction of state bonds on October 22

NEW DELHI:  The Reserve Bank of India on Friday said it will conduct the first-ever purchase auction of State Development Loans (SDLs) under Open Market Operations (OMOs) for an aggregate amount of Rs 10,000 crore on October 22. 

The purchase auction amount has been kept  at this level considering this is the first ever OMO purchase of SDLs, RBI said. The size of the auctions may be enhanced in the subsequent auctions depending on market response.

The central bank will purchase two SDLs each of 15 states and Union Territories through a multi-security auction using multiple price method. There is no security-wise noted amount. The SDLs will mature in 2029, 2030 and 2031.

On October 9, the RBI had said that to improve liquidity and facilitate efficient pricing, it has been decided to conduct OMOs in SDLs as a special case during the current financial year. The OMOs would be 
conducted for a basket of SDLs comprising securities issued by states, it added.

At present, SDLs are eligible collateral for Liquidity Adjustment Facility (LAF) along with T-bills, dated government securities and oil bonds. So far in the current financial year, 28 states and UTs have raised Rs 3.95 lakh crore cumulatively via market borrowings, which is 52 per cent more than what was seen last year, according to a note from Care Ratings.