February 7, 2018 / 10:08 AM / 6 months ago

RBI liquidity operations not meant to manage bond prices: Viral Acharya

MUMBAI/NEW DELHI (Reuters) - The objective of the liquidity operations conducted by the Reserve Bank of India (RBI) are not to manage the price of bonds, but to drive its monetary policy goals, Deputy Governor Viral Acharya, said on Wednesday after the central bank’s monetary policy meeting, damping expectations of bond purchases by the central bank.

FILE PHOTO: A Reserve Bank of India (RBI) logo is seen at the entrance gate of its headquarters in Mumbai, June 7, 2017. REUTERS/Shailesh Andrade/File Photo

The central bank kept its main repo rate at 6.00 percent for a third straight policy meeting and retained its “neutral” stance, seeking to support economic growth even as inflation has accelerated to a 17-month high.

“Except in rare, extraordinary economy-wide circumstances, the goal of RBI’s liquidity operations is not to manage directly the prices of any particular long-term asset market,” Acharya said at a news conference.

The finance ministry is expected to raise its concerns about the sharp rise in bond yields when it holds a meeting this week with the central bank to discuss government borrowing plans for the year, two people familiar with the matter told Reuters on Tuesday.

One of the sources said the government would raise the idea of the RBI buying bonds via open market operations (OMOs) to keep yields lower and inject liquidity.

Reporting by Abhirup Roy and Suvashree Choudhury; Editing by Euan Rocha

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