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Money & Banking - Govt Bonds


RBI cancels Rs 2,500 cr auctions under MSS

Our Bureau

The cancellation of the MSS auction is indicative that RBI may cancel further issuances under MSS, in view of tight liquidity, dealers said.

Mumbai , Nov. 4

IN response to the tightening liquidity conditions in the domestic debt market, the central bank today cancelled auctions for Rs 2,500 crore, scheduled under the Market Stabilisation Schemes for November 10.

"Taking into account all relevant factors, the Reserve Bank has decided that the auction of 91-day Treasury Bills for Rs 1,500 crore and the auction of the 364-day Treasury Bills for Rs 1,000 crore scheduled for November 10 under quarterly indicative schedule for MSS will not be conducted," said RBI in a press release.

According to a senior treasury official with a public sector bank, funds constraint is evident from the fact that a mere Rs 350 crore was parked in the reverse repo and the repo auction saw trades worth Rs 75 crore. Call money rates zoomed to a high 6.00 today, which is indicative of tightness in the funds position with banks, he added. Outflow on account of state development loan auction also has contributed to the pressure on funds.

The cancellation of the MSS auction is indicative that the Reserve Bank may cancel further issuances under MSS, keeping in view fund tightness, dealers said.

It is a possibility that the auction of dated securities worth Rs 8,000 crore announced on November 8 would not go through had the MSS issuance not been cancelled, they said.

Meanwhile, RBI has announced the auction of 91-day Government of India Treasury Bills for notified amount Rs 500 crore and auction of 364-day Government of India Treasury Bills for notified amount Rs. 1,000 crore, under the regular auction calendar.

The auctions will be conducted using "Multiple Price Auction" method.

The allocation to the non-competitive bidders will be outside the notified amount, at the discretion of the bank, said the release. Tenders should be submitted in the prescribed form on November 10 while payments by successful bidders will be on November 13.

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