September 24, 2018 / 6:19 PM / 2 months ago

India announces government bond purchases amid market turmoil

MUMBAI, Sept 24 (Reuters) - India’s central bank said it would buy 100 billion rupees ($1.38 billion) of government bonds in an open market operation, amid efforts by authorities to reassure investors over a brewing debt crisis in the non-banking financial sector (NBFC).

Concern about a credit crunch in two key NBFC’s, Infrastructure Leasing & Financial Services (IL&FS) and Dewan Housing Finance, raised fears of wider liquidity problems across the sector and hit domestic bonds, stocks and the rupee.

Finance Minister Arun Jaitley told investors on Monday the government would take necessary steps to ensure adequate liquidity to NBFCs after both the central bank and the market regulator said on Sunday they were closely monitoring developments and stood ready to act.

The Reserve Bank of India will buy 7.8 percent of the 2020 bond, 8.2 percent of the 2022 bond, 7.72 percent of the 2025 bond, 6.79 percent of the 2027 bond and 6.68 percent of the 2031 bond via an open market operation on September 27, it said late on Monday. (nENN3ZLR5O) ($1 = 72.6600 Indian rupees) (Reporting by Abhirup Roy Editing by Matthew Mpoke Bigg)

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