On February 25, the Reserve Bank of India is set to conduct sale and purchase of government bonds simultaneously under a special Open Market Operations (OMO).
According to reports, RBI is estimated to purchase and sell bonds worth Rs 10,000 crore each on that day.
These operations often referred to as Operation Twist, follow the central bank’s OMO purchases.
However, the aim of RBI for conducting a special OMO is to support the liquidity situation in the market and manage the bond yield.
Further, it purchased Rs 20,000 crore worth government bonds under MPO which was conducted on February 10.
The RBI has a key role to play as a debt manager to the government.
After this month’s monetary policy review, yields had surged in the absence of an OMO calendar.
As per RBI Governor Shaktikanta Das, Rs 12-lakh-crore massive government borrowing programme for the year is expected to be conducted smoothly.
Over the past one week, the central bank has taken a series of measures to keep yields under control.
Moreover, in order to manage the borrowing, the central bank should conduct at least Rs 2 lakh crore worth OMOs.
With the cash reserve ratio being restored to 4 percent in two stages so far, RBI has reportedly set the path for liquidity normalisation.
To prevent upsurge in borrowing cost, there is increased requirement for more OMOs as expected by Treasury dealers.
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