RBI for open market option to manage liquidity

MUMBAI: Reserve Bank of India executive director Usha Thorat on Thursday hinted that the apex bank could consider an open market operation (OMO) to adequately manage the excess liquidity conditions in the debt market, but added that the liquidity adjustment facility (LAF) was within control.
She also inferred that there was no need for an immediate repo rate cut.
This statement assumes significance since the market has been rallying for the past one week ever since the 10-year government benchmark security breached the 5.75 per cent levels to hit 5.58 on Thursday.
Over Rs 48,000 crore worth of investments were outstanding on the 1-day and 14-day repos, which reflected the huge amount of liquidity available in the system, dealers said.
With the Rs 9,000 crore auction currently on, there has been rumours in the market that the apex bank may announce an open market operation to absorb excess liquidity in the market.
Thorat said that the corporate private placement market through the debt route would be regulated further and a new set of guidelines would be announced soon.
She added that banks would soon be permitted to become direct members of the exchange for their own transactions in the bond market.