The Reserve Bank of India (RBI) has announced, on Monday, to infuse Rs. 12,500 crores into the system in order to increase liquidity through the purchase of government securities, scheduled to take place on Thursday. According to RBI, the purchase will be made through open market operations (OMOs).
The central bank in a statement released said, “Based on an assessment of prevailing liquidity conditions and also of the durable liquidity needs going forward, the RBI has decided to conduct purchase of…government securities under OMOs for an aggregate amount of ?125 billion on February 21, 2019”
RBI said that the eligible participants should submit their offers in electronic format on the RBI core banking solution (E-Kuber) system on February 21, adding that the result of the auction will be announced on the same day and payment to successful participants will be made on the following day.
OMOs are the financial instrument through which liquidity is either injected or extracted from the system. Money is pumped into the market, when there is illiquidity, by the purchase of government securities. Whereas in the case of a surplus, the excess money is sucked out by selling government bonds.