Reserve Bank of India announces Open Market Operations (OMO) purchase of State Government Securities

Reserve Bank of India is going to conduct an auction of State Development Loans for Rs 10,000 crore next Thursday.

  • Reserve Bank of India is going to conduct an auction of State Development Loans for Rs 10,000 crore next Thursday. However, there can be subsequent auctions depending on the market response. This is going to be the first-ever Open Market purchase of State Development Loans. RBI said that it will purchase the State Development Loans through a multi-security auction using the multiple price method. There is no security-wise notified amount. The Reserve Bank reserves the right to:
  • decide on the quantum of purchase of individual securities.
  • accept bids for less than the aggregate amount.
  • purchase marginally higher/lower than the aggregate amount due to rounding-off.
  • accept or reject any or all the bids either wholly or partially without assigning any reasons.

“It has been decided to conduct a purchase auction of SDLs under Open Market Operations (OMOs) for an aggregate amount of 10,000 crores on October 22, 2020, keeping in view that this is the first-ever OMO purchase of SDLs. Depending on market response, the size of the auctions may be enhanced in the subsequent auctions,” said RBI in its release.

“The result of the auction will be announced on the same day and successful participants should ensure availability of the requisite amount of securities in their SGL account by 12 noon on October 23, 2020,” RBI added.