RBI TO INFUSE RS 12,500 CRORE INTO FINANCIAL SYSTEM THROUGH OMO’S
08, Mar 2019
Prelims level : Economy- banking Mains level : Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.
The Reserve Bank of India (RBI) said it would infuse Rs 12,500 crore into the financial system through op¬en market operations (OMO).
- The central bank said it has decided to purchase certain government securities (gilt edged securities) under Open Market Operations (OMO) for an aggregate amount of Rs 12,500 crore on March 7, 2019 through multi-security auction using the multiple price method.
- The decision on OMO is based on an assessment of prevailing liquidity conditions and also of the durable liquidity needs going forward
- It further said the eligible participants should submit their offers in electronic format on RBI Core Banking Solution (E-Kuber) system
- 1. Open market operations are the sale and purchase of government securities and treasury bills by RBI or the central bank of the country.
- 2. The objective of OMO is to regulate the money supply in the economy.
- . When the RBI wants to increase the money supply in the economy, it purchases the government securities from the market and it sells government securities to suck out liquidity from the system.
- 4. RBI carries out the OMO through commercial banks and does not directly deal with the public. OMO is one of the tools that RBI uses to smoothen the liquidity conditions through the year and minimize its impact on the interest rate and inflation rate levels.
- 5. Buying of securities in the open market increases the supply of money. On the other hand, selling of securities reduces the volume of money with the public. To reduce the inflationary pressure, the RBI may sell securities in the open market.
- e-Kuber is the Core Banking Solution of Reserve Bank of India. E-Kuber provides the provision of a single current account for each bank across the country, with decentralised access to this account from anywhere-anytime using portal-based services in a safe manner. Core Banking Solutions (CBS) can be defined as a solution that enables banks to offer a multitude of customer-centric services on a 24×7 basis from a single location, supporting retail as well as corporate banking activities, as well as all possible delivery channels existing and proposed.
- The centralisation thus makes a “one-stop” shop for financial services a reality. Using CBS, customers can access their accounts from any branch, anywhere, irrespective of where they have physically opened their accounts.
- Almost all branches of commercial banks, including the Regional Rural Banks (RRBs), are brought into the core-banking fold. Core Banking Solutions (CBS) marked a paradigm shift as it made a bank’s particular branch customers, now bank customers as they can access their accounts from any branch for defined purposes. CBS links all branches of a bank and offers opportunities for information management, better customer service and improved risk management.
- e-Kuber enables ease of operations. The system also benefits state /central Governments as users. Some of the facilities offered include the provision of portal-based access which allows Government departments to access on anywhere-anytime basis and view their balances – of all types including the Ways and Means Advances, drawings, funds positions and the like – all in a consolidated manner so as to help them in better funds management.
- The capability of consolidating revenue collections by banks through the e-Kuber offers the potential for better flexibility for the Government in managing its finances apart from moving over towards higher levels of electronic banking.