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RBI to auction state development loans worth Rs 10,000 crore on Dec 23

BusinessToday.In     December 17, 2020

In a bid to inject liquidity in the system, the Reserve Bank of India will conduct the third auction of state developments loans (SDLs) worth Rs 10,000 crore under the Open Market Operations (OMO) on December 23. The central bank is conducting OMO purchase of government securities to enhance liquidity support for financial markets so as to revive activity in stressed sectors which have been disrupted by the COVID-19 pandemic and successive lockdown.  

The central bank has already conducted two OMOs for SDLs covering all states and union territories for a cumulative amount of Rs 20,000 crore. The first batch of OMO was conducted in October and the second in November.

"It has now been decided to conduct another purchase auction of SDLs under Open Market Operations (OMOs) for an aggregate amount of Rs 10,000 crore on December 23, 2020," the apex bank said on Thursday.

The RBI will purchase the SDLs through a multi-security auction using the multiple price method, it said.

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The apex bank said it 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.

Eligible participants can submit their bids in electronic format on the Reserve Bank of India Core Banking Solution (E-Kuber) system between 10:00 am and 11:00 am on December 23, 2020, it said. 

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The RBI said that physical bids would be accepted only in the event of system failure.

The result of the auction will be announced on the same day and successful participants should ensure availability of requisite amount of securities in their SGL account by 12 noon on December 24, 2020, it added.

The RBI is conducting OMOs in SDLs as a special case during the current financial year to improve liquidity and facilitate efficient pricing in view of the COVID-19 pandemic. At present, SDLs are eligible collateral for Liquidity Adjustment Facility (LAF) along with T-bills, dated government securities and oil bonds.

By Chitranjan Kumar

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