1 min read.Updated: 09 Oct 2020, 10:53 AM ISTAvneet Kaur
For the first time ever, RBI will conduct OMOs of state loans as a special case during the current financial year.
Governor Shaktikanta Das today announced to conduct an open market operations (OMO) purchase worth ₹20,000 crore, to be conducted next week. "RBI will maintain comfortable liquidity conditions and will conduct market operations in the form of outright and special open market operations. In response to feedback from market participants, the size of these auctions will be increased to ₹20,000 crore. It is expected that the market participants will respond positively to this initiative," said RBI Governor.
For the first time ever, RBI will conduct OMOs of state loans. "In order to impart liquidity to SDLs and thereby facilitate efficient pricing, it has been decided to conduct open market operations (OMOs) in SDLs as a special case during the current financial year," said RBI.
RBI Governor in his policy meet speech said that OMOs in SDL would improve secondary market activity and rationalize spreads of SDLs over central government securities of comparable maturities. "This measure, along with the extension of HTM till March 2022, should ease concerns about illiquidity and absorptive capacity for the total government borrowing in the current year."
Maintaining status quo for the second time in a row, Reserve Bank of India on Friday decided to keep benchmark interest rate unchanged at 4% but maintained an accommodative stance. Repurchase (repo) rate has been left unchanged at 3.35%.
This is the first meeting of the new MPC which was formed after the appointment of three eminent economists – Jayant Verma, Ashima Goyal and Shashanka Bhide.
The meeting of the six-member MPC, earlier slated for September 29 to October 1, was rescheduled as the appointment of independent members was delayed. The MPC must have a quorum of four.
Experts expect RBI to maintain status quo on the benchmark lending rates in view of the inflation. In the last monetary policy review on August 6, the RBI chose inflation as its priority.