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In a first, RBI announces Operation Twist cum OMO: March 2021

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RBI announces Operation Twist worth ₹10,000 crore under OMOIn a first, the Reserve Bank of India (RBI) is all set to conduct the simultaneous purchase and sale of Government securities (GS) under Open Market Operations (OMO) for an aggregate amount of Rs 20,000 crore under purchase and Rs 15,000 crore under sale on March 10, 2021.

  • This makes it a combination of Operation Twist of Rs 15,000 crore and OMO of Rs 5000 crore.
  • The bids for the same will be accepted by RBI in electronic format through its Core Banking Solution (E-Kuber).

Why is this combination is opted?

The move to experiment with two tools viz. OMO & Twist to bring down the yield on the 10-year benchmark bond to below 6% to support the government’s borrowing programme.

Following table shows the sale and purchase of OMOs:

Security Date of Maturity
Purchase
5.15% GS 2025 November 9, 2025
7.17% GS 2028 January 8, 2028
5.85% GS 2030 December 1, 2030
7.57% GS 2033 June 17, 2033
Sale
8.79% GS 2021 November 8, 2021
8.20% GS 2022 February 15, 2022
8.35% GS 2022 May 14, 2022

What is OMO?

OMO is a part of “Operation Twist” to ease pressure evolving liquidity and market conditions. The main purpose of the OMO is to bring down the yields at the longer end.

  • So far in FY21, RBI has undertaken OMO purchases of GS of Rs 4.07 trillion and OMO purchases of state development loans of Rs 30,000 crore.

What is E-Kuber?

i.E-Kuber is the Core Banking Solution (CBS) platform of RBI.

ii.It enables each bank to connect their single current account across the country.

iii.G-Secs are issued through auctions conducted by RBI on E-Kuber

Recent Related News:

i.In order to boost liquidity in the economy, On February 10, 2021, the Reserve Bank of India (RBI) purchase Rs 20,000 crore ($2.74 billion) of government securities under Open Market Operations (OMO).

ii.On February 16, 2021, the Reserve Bank of India (RBI) permitted resident individuals to make remittances under Liberalised Remittance Scheme (LRS) to International Financial Services Centres (IFSCs) set up in India under the Special Economic Zone Act, 2005.

About Reserve Bank of India (RBI):

Established – 1st April, 1935
Headquarters– Mumbai, Maharashtra
Governor– Shaktikanta Das
Deputy Governors– 4 (Bibhu Prasad Kanungo, Mahesh Kumar Jain, Michael Debabrata Patra, and M Rajeswar Rao)