#IndiaFightsCorona: Modi government's big decision to increase liquidity, enhance market confidence

Amid comprehensive preparations to curb coronavirus spread in India, Modi government has taken a big decision! In a major development, the Reserve Bank of India (RBI) has announced that it would purchase government securities worth Rs 10,000 crore through open market operations (OMO). The important step has been taken in a bid to increase liquidity and enhance confidence in the market amid the coronavirus crisis.

What RBI said?

- In a statement, the RBI said that with the heightening of Covid-19 pandemic risks, certain financial market segments have been experiencing a tightening of financial conditions as reflected in the hardening of yields and widening of spreads.

- "It is important to ensure that all market segments remain liquid and stable, and function normally."

- "On a review of the current liquidity and financial conditions, the Reserve Bank has decided to conduct open market operations on March 20, 2020 (Friday) in the form of purchase of an aggregate amount of Rs 10,000 crore of the following Government securities through a multi-security auction using the multiple price method."

- Under the scheme, the RBI will purchase government securities maturing in between 2022 and 2025. The securities were issued with a coupon rate of 8.2 per cent, 7.37 per cent, 7.32 per cent and 7.72 per cent.

- The RBI statement said: "There is no notified amount against any of these securities within the aggregate ceiling of Rs 10,000 crore set for the operation.

- "The central bank reserves the right to decide on the quantum of purchase of individual securities, accept offers for less than or higher than the aggregate amount of Rs 10,000 crore and also to accept or reject any or all offers either wholly or partially without assigning any reason," it added.

Meanwhile, coronavirus fears continue to rattle financial markets across the world and concerns have been raised over the economic impact of the pandemic.

The RBI has said it is ready to take measures required to calm the markets and improve liquidity.