According to analysts, the RBI is willing to borrow at higher rates for the government to push the government borrowing programme through, and at the same time it wants the interest rates to rule at low levels.

The OMO is in line with governor Bimal Jalan's statement that he intends to keep a leash on monetisation by selling off all the government securities in its books to the market. Currently, the monetisation is pegged at Rs 16,000 crore and if the RBI sells all the four securities, it will be able to bring down the figure by at least Rs 8,000 crore. This will give the central bank more elbow room to put through the government borrowing programme pegged at a whopping Rs 79,000crore.

The securities put out are the newly auctioned 11.55 per cent gilt maturing in 2001, the 11.75 per cent 2003, the 11.90 per cent 2007 and the 12.15 per cent 2008.

"The Reserve Bank is undertaking such an aggressive OMO as it thinks there is enough liquidity and banks will buy these securities from the sale window. The rates are also attractive," a source said. Analysts said that the RBI thinking stems from the fact that it mopped up Rs 11,000 crore on Friday and Saturday.

The RBI has priced the 11.55 per cent 2001 gilt at Rs 100.07 which indicates a yield of 11.52 per cent down by 3 basis points at the auction held on July 1. The security was traded on Friday at a premium of 14 paise in the debt market.

The 11.75 per cent 2003 gilt has been priced at Rs 100.07 indicating a lower yield of 11.72 per cent while the 11.90 per cent 2007 gilt has been priced at Rs 99.22. The yield on this security works out to 12.03 per cent and the 12.15 per cent 2008 gilt has been priced at Rs 100.36. The yield ofthis security works out to 12.09 per cent.

The RBI has placed the 11.90 per cent 2007 gilt at an attractive price simply because it has a huge stock of this security. It took 99.9 per cent devolvement of this security on its book and shows its earnest desire to reduce monetisation," an analyst in a brokerage house said. The Rs 4,000-crore nine-year paper devolved on the RBI to the extent of Rs 3,999.5 crore.