The Reserve Bank of India (RBI) has announced that it will purchase Rs 10,000 crore in government bonds under the open market operations programme to arrest the continuously rising bond yields.
"With the heightening of Covid-19 pandemic risks, certain financial market segments have been experiencing a tightening of financial conditions as reflected in the hardening of yields and widening of spreads. It is important to ensure that all market segments remain liquid and stable, and function normally," the RBI said in a press release on Wednesday.
Based on a review of the current liquidity and financial conditions, the RBI has decided to conduct open market operations in the form of purchase of Rs 10,000 crores of the government securities through a multi-security auction using the multiple price method on March 20, 2020, it said.
"There is no notified amount against any of these securities within the aggregate ceiling of Rs 10,000 crores set for the operation," it said.
As per the RBI notification, eligible participants may submit their offers in electronic format on the Reserve Bank of India Core Banking Solution (E-Kuber) system between 10.30 a.m. and 12.00 noon on March 20, 2020. Physical offers would be accepted only in the event of system failure, it said.
The result of the auction will be announced on the same day and payment to successful participants will be made during banking hours on March 23, 2020. Successful participants should ensure availability of requisite amount of securities in their SGL accounts by 12 noon on March 23, 2020, the RBI said.
Earlier on Monday, the RBI had announced to conduct additional Long Term Repo Operations (LTROs) for amount up to Rs 1,00,000 crore at the policy repo rate on March 18, 2020. Based on further review of evolving liquidity conditions, additional tranches of the LTROs would be announced separately, it had said.