Mumbai: The Reserve Bank's open market operations are not primarily aimed at meeting short-term liquidity needs, but to manage long-term balance-sheet growth in line with the inflation target, Governor Raguram Rajan said Tuesday.
Answering a question on the government bond sales through open market operations (OMOs), Rajan said, "We have in mind a certain projection for the rate at which we want our balance sheet to grow. We want to keep the rate of growth of our balance sheet consistent with what we want inflation to be.
"So, when we find our balance sheet is growing faster or slower, we undertake OMOs to adapt the size and the composition of the balance sheet," Rajan told reporters at the post-policy meeting, wherein he left all the key policy rates unchanged.
The Reserve Bank so far has offered to sell Rs 30,000 crore of government bonds through OMOs in the current fiscal.
"I know some people have been thinking about us using OMOs to manage long-term interest rates. We are not trying to manage long term-interest rates in any way," Rajan added.
Executive director Michael D Patra said OMOs are conducted essentially to align liquidity constraints with the programmed expansion of primary money that RBI plans on its expectations of growth and inflation.
