PSBs Ask RBI to Add SDLs to OMO Purchase Auctions
Why in the news
Lenders asked the central bank to buy state bonds too in its open market purchases, since state paper has become much costlier relative to central paper.
About SDLs
| Point | Detail |
|---|---|
| Use of funds | Financing fiscal deficits and capital expenditure |
| Yield versus G-Secs | Usually higher, reflecting higher perceived risk and lower liquidity |
About Open Market Operations
OMOs are RBI’s purchases and sales of government securities in the open market, used to steer system liquidity, influence yields and back the monetary policy stance.
Exam angle
- Demand: include SDLs in OMO purchase auctions.