Undersubscription is likely to occur when there is an increase in market participants’ demand for the financial assets the Bank offers to purchase in its market operations. Funds-supplying operations are the transaction where a central bank provides funds to the current account deposits of financial institutions against its purchase of a specific financial asset.
For example, during February and March 2002, uncertainty about financial system stability was heightening as full protection of time deposits was about to be lifted from April. Moreover, the demand for such risk-free assets as treasury bills (TBs) and financing bills (FBs) by all economic agents, including financial institutions, increased significantly in the market.