IAS Gyan

Daily News Analysis

RBI to buy, sell Rs. 20,000 cr. G-secs  

19th March, 2021 Economy

Context:

  • The Reserve Bank of India (RBI) has decided to conduct simultaneous purchase and sale of government securities under Open Market Operations (OMO) for an amount of Rs. 10,000 crore each on March 25.
  • The decision to conduct the OMO was taken after a review of current liquidity and financial conditions.

 

About OMO:

  • Open market operations (OMO) refers to a central bank buying or selling short-term Treasurys and other securities in the open market in order to influence the money supply, thus influencing short term interest rates.1
  • Buying securities adds money to the system, making loans easier to obtain and interest rates decline.
  • Selling securities from the central bank's balance sheet removes money from the system, making loans more expensive and increasing rates.
  • These open market operations are a method the central bank uses to manipulate interest rates.

 

https://www.thehindu.com/todays-paper/tp-business/rbi-to-buy-sell-rs-20000-cr-g-secs/article34103984.ece