RBI to conduct third auction of SDLs via open market operations next week

The Reserve Bank of India will conduct the third auction of state developments loans (SDLs) aggregating Rs 10,000 crore under the Open Market Operations (OMO) on December 23.

The Reserve Bank has conducted two OMOs in SDLs covering all states/UTs for a cumulative amount of Rs 20,000 crore. The first-ever auction under OMOs in SDLs was conducted in October and the second in November.

"It has now been decided to conduct another purchase auction of SDLs under Open Market Operations (OMOs) for an aggregate amount of Rs 10,000 crore on December 23, 2020," it said in a statement.

The central bank will purchase the SDLs through a multi-security auction using the multiple price method. There is no security wise notified amount.

The RBI had decided to conduct OMOs in SDLs as a "special case" during the current financial year with an aim to improve liquidity and facilitate efficient pricing.

At present, SDLs are eligible collateral for Liquidity Adjustment Facility (LAF) along with T-bills, dated government securities and oil bonds.

The statement further said the RBI reserves the right to decide on the quantum of purchase of individual securities and accept bids for less than the aggregate amount.

The result of the auction will be announced on December 23 itself.