Mumbai, Aug 12 : The Reserve Bank of India has mopped up nearly Rs 2,000 crore through open market operations (OMO's) conducted in the last one week. Thus, the central bank has managed to reduce the extent of monetisation by nearly Rs 3,000 crore in the past one month. The monetised debt had soared to Rs 16,000 crore after the central bank was forced to take on devolvements on its own books.Debt market sources said that the Reserve Bank has been successful in mopping up nearly Rs 1,250 crore through the sale of the 11.95 per cent gilt maturing in 2004 from August 6 to August 11. The security was pulled out of the sale list on Wednesday. The RBI had Rs 1,400 crore worth of this stock in its accounts, analysts said. The central bank had pegged the price of this security at Rs 100.31. On Tuesday alone the security mopped up Rs 550 crore through the sale window.
The 11.90 per cent gilt maturing in 2008 has mopped up Rs 675 crore in the last seven days, dealers said. The security is still on the sale list ofthe RBI and the price has been tagged at Rs 98.75 -- unchanged from the previous list. On Tuesday itself, deals to the tune of Rs 220 crore were concluded in this security.
Anlaysts said that the RBI's aggressive OMO is in line with governor Bimal Jalan's statement that the RBI will reduce the stock in its account through OMO's. "The success of the OMO's takes off pressure on money supply which has been on a higher trajectory. This will have an impact on inflation," an analyst in a leading brokerage house said.
The government's gross borrowing programme of Rs 79,000 crore took a massive toll on the RBI as it had to take nearly Rs 16,000 crore on its books through various private placements and devolvements of government security. As a result, the net RBI credit to the government went up, thus having an effect on the money supply. M3 touched a 139-week high of 8.32 per cent as on July 25.
"There is liquidity in the system and the RBI is likely to pursue it with aggressive OMO's," another analyst in aleading investment house said. In the next fortnight, gross inflow to the tune of Rs 4,000 crore is expected to come into the system on account of various redemptions and coupon payments of government securities. This does not take into account the inflow from the Resurgent India Bonds.
If one auction of Rs 4,000 crore is announced in the next fortnight, there is a likelihood that there will be a net outflow of Rs 1,000 crore from the system.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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