Indian Economy News

RBI announces Rs. 10,000 crore special open market operations on February 25

  • IBEF
  • February 16, 2021

On February 15, 2021, the Reserve Bank of India (RBI) announced that it would conduct simultaneous sales and purchases of government bonds under a special open market operation (OMO) on February 25, 2021.

On the day (on February 25, 2021), the RBI will purchase and sell bonds worth Rs. 10,000 crore (US$ 1.38 billion) each.

RBI said, “The Reserve Bank has agreed to conduct simultaneous purchases and sales of government securities under OMO for an aggregate amount of Rs. 10,000 crore (US$ 1.38 billion) each on 25 February 2021, following a review of existing liquidity and financial conditions.”

To help the liquidity situation in the market and control the bond price, the RBI conducts special OMOs.

On February 10, 2021, the RBI conducted an OMO under which it purchased Rs. 20,000 crore (US$ 2.75 billion) worth of government bonds. The RBI also plays the role of the government as a debt manager.

Rs. 12 lakh crore (US$ 165.25 billion) massive government borrowing programme for the year was promised by RBI Governor Mr. Shaktikanta Das to be carried out smoothly.

Mr. Vinay Pai, Head-Fixed Income, Equirus Capital stated that to handle the borrowing, the central bank would have to conduct at least Rs. 2 lakh crore (US$ 27.54 billion) value OMOs in the next year. The path to liquidity normalisation has already been set by the RBI, with the cash reserve ratio being restored to 4% in two phases. Treasury dealers expect that to prevent the borrowing cost from rising, more OMOs would be needed.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

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