RBI to pour in Rs. 10000 crore into the economy

RBI has recently announced the purchase of government securities (Gsecs) worth Rs 10000 crore for liquidity infusion in the economy. RBI will buy Gsecs through the open market operations (OMO) on June 20.

OMO option of RBI allows sale/purchase of Gsecs to/from the market as per the rupee liquidity requirement. On the contrary during a boom period, RBI practices sell-off of such securities for tightening.

According to the press release RBI will buy through multi security auction using multi price method. Though the amount is not specified yet, but the buying would be through a basket of securities with varied dates of maturity.

1.       8.27% GS 2020 with date of maturity 09-Jun-2020

2.       8.40% GS 2024 with date of maturity 28-Jul- 2024

3.       8.24% GS 2027 with date of maturity 15-Feb-2027

4.       7.88% GS 2030 with date of maturity 19-Mar-2030

5.       8.32% GS 2032 with date of maturity 02-Aug-2032

RBI holds the right to decide on the quantum of purchase of individual securities and accept or reject the offers with no binding of a valid justification. The offers from individuals would be accepted through E-kuber system between 10.00 a.m. to 12.30 p.m. on June 20 along with the results.

This may be an alternative to the interest rate cut anytime in near future. Earlier, in the month of May, RBI had announced Rs 15000 crore infusion through OMO for buying on May 30, 2016.