The RBI got cracking after its nine-hour board meeting on Monday, announcing it will buy government securities under open market operations for Rs 8,000 crore on November 22. The central bank said that considering the liquidity situation in India, the RBI will buy these securities through multi-security auction using the multiple price method.
"Based on an assessment of prevailing liquidity conditions and also of the durable liquidity needs going forward," the Reserve Bank said it has decided to conduct purchase of "Government securities under Open Market Operations for an aggregate amount of Rs 80 billion (Rs 8,000 crore) on November 22, 2018 (Thursday) through multi-security auction using the multiple price method."
Earlier, the Reserve Bank of India (RBI) concluded a critical day-long board meeting on a "cordial" note. The RBI board has reportedly come to the conclusion that the existing committee of the RBI will oversee the issue of relaxing PCA norms for banks. Also, a new scheme could be announced for MSME loans up to Rs 25 crore, reported CNBC TV 18. The next meeting of the RBI will be held on December 14 to discuss the issues of liquidity in the system.
The government and the RBI are at loggerheads over several issues, including reduction of capital ratios for banks. This would not only speed up loans to small businesses in remote parts of the country but would also help the Modi government politically ahead of the Assembly elections in five states, and the subsequent Lok Sabha elections in the country.
Earlier RBI Governor Urjit Patel and his deputies came face to face with government nominee directors, including Economic Affairs Secretary Subhash Chandra Garg and Financial Services Secretary Rajiv Kumar, and independent members like S Gurumurthy to arrive on a middle ground on some major issues. The three most contentious issues included a shortage of liquidity in the system, RBI's strict Prompt Circular Action (PCA) norms against 11 banks, and how much reserves should remain with the RBI.