FIRST EVER OPEN MARKET OPERATION IN STATE DEVELOPMENT LOANS-2020

FIRST EVER OPEN MARKET OPERATION IN STATE DEVELOPMENT LOANS-2020

Context

The Open Market Operations conducted in State Developments Loans was carried out for the first time in 2020.

Open Market Operations

• OMOs are conducted by the Reserve Bank of India (RBI) only in State Developments Loans.
• OMOs are carried out by the central bank by selling or purchasing of Government Securities to or from the market to adjust the conditions of rupee liquidity in the market.

State Developments Loans(SDLs)

• Bonds and dated securities issued by the government are called State Developments Loans(SDLs).

Details

• With an aim to improve liquidity and facilitate efficient pricing, the OMOs worth 10 thousand crore rupees will be conducted as a special case during the current financial year.
• The central bank will buy the SDLs through a multi-security auction using the multiple price method. The result of the auction will be declared on the same day.
• Currently, SDLs are eligible collateral for the Liquidity Adjustment Facility (LAF) by the side of T-bills, dated government securities and oil bonds.
• The OMOs will be conducted for a basket of SDLs consisting of securities issued by states.