The Reserve Bank of India (RBI) on Thursday said it will conduct the first special open market operation (OMO) of fiscal year 2022 (FY2022), entailing simultaneous purchase and sale of government securities (G-Secs) for an aggregate amount of ₹10,000 crore each, on May 06, 2021.
Under the special OMO (also known as Operation Twist/ OT), the central bank will purchase three G-Secs maturing in 2026, 2028 and 2030 for an aggregate amount of ₹10,000 crore.
It will simultaneously sell two 182-day treasury bills maturing on October 21 and October 28.
“In the backdrop of the Fed’s experience on OTs, the RBI announced special OMOs (OTs) involving the simultaneous purchase of long-term and sale of short-term securities in December 2019, predating the Covid-19 outbreak in India,” said an article in the central bank’s March 2021 monthly bulletin,
“These operations were aimed at compressing the term premium and reducing the steepness of the yield curve. Moderation in long term risk-free (G-Sec) rates, in turn, gets reflected in other financial market instruments that are priced of the G-Sec rate, thereby, improving monetary transmission,” the article stated.