RBI announces Rs 10,000 crore special open market operations

The Reserve Bank of India (RBI) said it will conduct simultaneous sale and purchase of government bonds under a special Open Market Operations (OMO) on February 25, 2021.

 “On a review of current liquidity and financial conditions, the Reserve Bank has decided to conduct simultaneous purchase and sale of Government securities under OMO for an aggregate amount of Rs 10,000 crore each on February 25, 2021,” said the RBI.

The RBI conducts special OMOs to support the liquidity situation in the market and manage the bond yield. The RBI will buy and sell bonds worth Rs 10,000 crore each on that day.

The RBI had conducted an OMO on February 10 under which it purchased Rs 20,000 crore worth the government bonds. The RBI also play the role of a debt manager to the government.

RBI Governor Shaktikanta Das had promised the Rs 12-lakh-crore massive government borrowing programme for the year will be carried out smoothly.

According to Vinay Pai, Head-Fixed Income, Equirus Capital., the central bank will have to conduct at least Rs 2 lakh crore worth OMOs in the next year to manage the borrowing.

The RBI has already set the path for liquidity normalisation, with the cash reserve ratio being restored to 4 percent in two stages. Treasury dealers expect that more OMOs will be required to prevent the borrowing cost from going up.