The Reserve Bank of India (RBI) on Thursday said it will conduct simultaneous purchase and sale of government securities under open market operations (OMOs) for Rs 10,000 crore each on January 7.
The decision was taken after a review of current liquidity and financial conditions, the RBI said in a statement. Eligible participants should submit their bids in electronic format on RBI's core banking solution (E-Kuber) system between 10 and 11 am on January 7.
Simultaneous purchase and sale of G-sec under OMOs, popularly known as Operation Twist, involves purchasing the securities of longer maturities and selling an equal value of securities of shorter maturities.
Simultaneous sale and purchase of government bonds are conducted with the objective of managing bond yields and improve monetary transmission. RBI has reduced the repo rate by 115 basis points in 2020, but lending rate cuts by banks has not been commensurate.
On January 7, the RBI will purchase three government securities (G-Sec) of different maturity dates aggregating to Rs 10,000 crore and sell two securities aggregating to the same amount using the multiple price auction method.
The result will be announced on the same day and successful participants should ensure availability of the requisite amount of securities in their current account or subsidiary general ledger (SGL) account by noon on January 8.
With the heightening of COVID-19 pandemic risks, certain financial market segments have been experiencing a tightening of financial conditions as reflected in the hardening of yields and widening of spreads. The central bank has been constantly reviewing current and evolving liquidity and market conditions.