As agent of the Government, the Bank of Mauritius began weekly auctioning of Treasury Bills as from 1991 as part of its Open Market Operations. The weighted average yield of bids received at weekly auctions is fed into the Bank Rate to reflect market price for liquidity on an on-going basis. Further, the Bank of Mauritius carries in its Secondary Market Cell, a portfolio of Treasury Bills which is employed in secondary trading activities to enable market participants adjust their liquidity between weekly auctions. The Bank also issues longer dated government securities with maturities up to 20 years from time to time. An interbank money market operates on a regular basis.
Market participants are free to fix the rates at which interbank trades are conducted.
There is no reserve requirement on interbank trading activity. There is no other reserve requirement on banks. The Bank of Mauritius also carries out as from 1999 and at its own discretion repo transactions through auctions on a continuing basis, based on its reading of prevailing liquidity conditions on the market though its liquidity forecasting framework. The rates thrown up by the repo market track closely those on the interbank market, reflecting the close correspondence between the two markets. As lender of last resort, the Bank provides a Lombard facility to banks whereby individual banks can at their own discretion borrow overnight up to fixed amounts which are related to their Tier 1 capital.