RBI to conduct first-ever OMO purchase of state govt securities on Thursday: All you need to know

In a release, the RBI said that State Development Loans (SDLs) will be purchased through a multi-security auction. It also said that the size of the purchase auctions might be enhanced in subsequent auctions.

The Reserve Bank of India (RBI) is set to conduct Open Market Operations (OMO) in State Development Loans (SDLs) on Thursday (October22). The central bank has kept Rs 10,000 crore to buy SDLs in what is seen as the first ever such operation in the country.

The central bank has kept Rs 10,000 crore to buy SDLs in what is seen as the first ever such operation in the country. (Reuters file photo)

OMOs in generic sense refer to the sale or purchase of government securities by the RBI to commercial banks with a view to adjust liquidity conditions in the economy.

The SDLs are defined as securities which are issued by states to manage their own finances.

In a release, the RBI said that SDLs will be purchased through a multi-security auction. It also said that the size of the purchase auctions might be enhanced in subsequent auctions.

The RBI further said that it will decide on the quantum of purchase of individual securities and accept bids which are less than the aggregate amount. Due to rounding off, the RBI has the right to purchase these securities at an amount which is marginally higher/lower than the aggregate amount.

The central bank also said that it can reject any or all of the bids either full or partially without giving any reason.

Those eligible have to submit their bids in electronic format on the RBI Core Banking Solution (E-Kuber) system between 10 am and 11 am on Thursday.

“Bids or offers in physical form will only be accepted if there is system failure and such bid or offer should be submitted to the financial markets operations in the prescribed form obtainable from RBI website before 11 am on Friday,” the bank said in the release.

The result of the auction will be announced on Thursday itself and successful participants are required to ensure availability of the requisite amount of securities in their Subsidiary General Ledger (SGL) account by 12 noon on Friday.