The Reserve Bank of India (RBI) on March 4 said it will conduct simultaneous purchase and sale of government bonds on March 10 under the so-called Open Market Operations (OMOs). OMOs refer to purchase or sale of government bonds by the central bank.
“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,” the RBI said in a release. This will be conducted for an aggregate amount of Rs20,000 crore under purchase and Rs 15,000 crore under sale on March 10, 2021, the RBI said.
The RBI conducts OMOs to manage the rupee liquidity in the financial system and control volatility in bond yields. The RBI also acts as the debt manager for the government and manage its yearly borrowing plan. The government has targeted to borrow Rs 12 lakh crore next fiscal year.
The RBI has already conducted several rounds of OMOs so far. Announcing the March 10 OMO, the RBI said it will continue to monitor evolving liquidity and market conditions and take measures as appropriate to ensure orderly functioning of financial markets.
After the government announced its huge borrowing plan, the yield on 10-year government bond inched up by 10-15 bps but has eased after the RBI actively intervened in the market.
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