The Reserve Bank today decided to purchase government securities for up to Rs 12,000 crore as part of monetary review decisions to inject overall Rs 48,000 crore into the system, which is facing cash crunch due to advance tax payment and busy credit season.
The Reserve Bank of India would conduct Open Market Operation (OMO) purchase auctions of Rs 12,000 crore every week for four weeks starting with the week ending December 24, 2010, the central bank had announced in its mid-quarterly review of credit policy last week.
In the process, RBI will purchase three kinds of government papers that are scheduled to mature in 2015, 2017 and 2020.
The central bank will conduct the auction on December 22 and payment to the successful bidders will be made on December 24.
To ease liquidity pressure on the system, RBI last week also cut 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 per cent from the present 25 per cent.
For this purpose, RBI will continue to conduct special Liquidity Adjustment Facility.
RBI lends and borrows money from banks against government securities under this facility.
However, the 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." PTI DP IND