Reserve Bank of India (RBI) is going to conduct its first-ever Open Market Operation (OMO) purchase of State Developments Loans (SDLs) on 22nd October.
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Key-Points
The OMOs worth ten thousand crore rupees will be conducted as a special case during the current financial year with an aim to improve liquidity and facilitate efficient pricing.
The RBI will purchase the SDLs through a multi-security auction using the multiple price method. The result of the auction will be announced on the same day.
At present, SDLs are eligible collateral for the Liquidity Adjustment Facility (LAF) along with T-bills, dated government securities and oil bonds. The OMOs will be conducted for a basket of SDLs comprising securities issued by states.
State Development Loans (SDLs) are dated securities issued by states for meeting their market borrowings requirements. In effect, the SDL are similar to the dated securities issued by the central government.
Purpose of issuing State Development Loans is to meet the budgetary needs of state governments. Each state can borrow upto a set limit through State Development Loans.
