The Reserve Bank on Monday announced the purchase of government securities worth Rs 12,000 crore as part of its decision to inject Rs 48,000 crore into the system, which is facing a cash crunch due to advance tax payment and the busy credit season.
RBI will conduct the auction on January 5 and payment to the successful bidders will be made on January 6.
The central bank's mid-quarterly review of credit policy in December 2010, had made it clear that it would conduct an Open Market Operation (OMO) purchase auction of Rs 12,000 crore every week for four weeks. In the process, RBI will purchase four kinds of government paper that are scheduled to mature in 2015, 2017, 2019 and 2021.
For this purpose, RBI will continue with the special Liquidity Adjustment Facility (LAF).
RBI lends and borrows money from banks against government securities under this facility. To ease liquidity pressure on the system, RBI had last month cut the Statutory Liquidity Ratio (SLR), which is a requirement for banks to keep portion of their deposits in government securities, cash and gold, by one percentage point to 24%.
However, RBI had cautioned that its moves should not be seen as a change in the policy stance, since "inflation continues to remain a major concern."
However, RBI had cautioned that its moves should not be seen as a change in the policy stance, since "inflation continues to remain a major concern."