RBI announces third round of Operation Twist on Monday
The central bank has been forced to think of unconventional ways to lower interest rates.
By ETMarkets.com | Updated:
RBI to sell & purchase bonds worth Rs 10,000 crore each on Monday
NEW DELHI: The Reserve Bank of India (RBI) on Thursday announced simultaneous purchase and sale of government securities through special open market operations (OMOs) for Rs 10,000 crore each on January 6.
In December, RBI had for the first time ever conducted a special open market operation (OMO), similar to the 'Operation Twist' carried out in the United States near the start of the decade.
In the first tranche, the central bank purchased securities worth Rs 10,000 crore and sold bonds worth Rs 6,825 crore.
Later, in the second special open market operation (OMO), the RBI bought Rs 10,000 crore of long-term government securities and sold Rs 8,501 crore of three short-term bonds.
“On a review of the current liquidity and market situation and an assessment of the evolving financial conditions, the Reserve Bank has decided to conduct simultaneous purchase and sale of government securities under Open Market Operations (OMO) for Rs 10,000 crores each on January 6, 2020,” RBI said in a statement on Thursday.
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The results of the auction will be announced on January 7, the RBI said while announcing the special OMO.
The RBI further said it reserves the right to accept or reject any or all the bids or offers either wholly or partially without assigning any reasons.
With banks passing on only a small part of rate cuts, RBI has been forced to think of unconventional ways to lower rates.
With the benchmark 10-year G-Sec yield at an elevated level for quite some time, despite a series of rate cuts by the central bank, economists believe this special move could help transmission of rates in the economy.
