RBI to buy bonds worth Rs 20,000 crore via open market operations on February 10

The Reserve Bank of India (RBI) on February 8 announced its plan to buy bonds worth Rs 20,000 crore through open market operations (OMO) to support the government’s borrowing programme.

The RBI announced an Open Market Operations (OMO) Purchase of Government of India Securities for an aggregate amount of Rs 20,000 crore on February 10, 2021, and said it stands committed to ensure the availability of ample liquidity in the system in order to foster congenial financial conditions.

“On a review of current liquidity and financial conditions, therefore, the Reserve Bank has decided to conduct purchase of Government securities under Open Market Operations (OMO) for an aggregate amount of Rs 20,000 crore on February 10, 2021,” the RBI said in a press release.

The central bank is expected to buy more at auctions to support the government’s huge borrowing programme.

The yield on 10-year bonds had surged last week after the government announced its borrowing plan. However, it had eased to 6.031 percent at the time of filing this copy from the previous close of 6.071 percent.

Announcing a status-quo on rates on Friday, the RBI Governor Shaktikanta Das assured investors that its stance on liquidity remained accommodative and that the government's Rs 12.06 lakh crore borrowing programme for the fiscal year starting April would be managed in a smooth and orderly manner.

The government will borrow Rs 12.05 lakh crore from the market in 2021-22, lower than the Rs 12.80 lakh crore estimated for the current financial year.

According to the Revised Estimate, the gross borrowing for the current financial year was raised to Rs 12.8 lakh crore as against the Budget Estimate of Rs 7.8 lakh crore, registering an increase of 64 percent.

Gross borrowing includes repayments of past loans. Repayment for past loans in the next financial year has been pegged at Rs 2.80 lakh crore. The government raises money from the market to fund its fiscal deficit through dated securities and treasury bills.

As a result, net borrowing would come down to Rs 9.24 lakh crore for the next fiscal, while for the current fiscal it is estimated at Rs 10.52 lakh crore during 2020-21.