Cash crunch easing: RBI to conduct open market operation

MUMBAI: The Reserve Bank of India will conduct an open market operation on Thursday, an action where it will purchase government bonds to release cash easing liquidity in the system at the beginning of the financial year.

The cash-crunch has not yet eased, now at about 90,000 crore a day versus about Rs 1.30-1.40 lakh crore in March.

“Based on the current assessment of prevailing and evolving liquidity conditions, the Reserve Bank has decided to conduct purchase of government securities under Open Market Operations for an aggregate amount of ? 15000 crore,” RBI said in a release on Tuesday.

The securities, which will be bought by the central bank from markets, include six bonds maturing in the range of four to 17 years.

“RBI may conduct similar OMOs every three-four weeks to ease liquidity,” said Piyush Wadhwa, head of trading-financial markets group, at IDFC Bank. “The current shortfall in the system is close to Rs 1 lakh crore, which RBI shall attempt to neutralise over a period of time.”

“RBI is expected to manage it through a combination of forex market or OMO purchases,” he said.