RBI to conduct OMO to boost liquidity

RBI will sell short-term securities that are maturing in the current band next year and purchase long-term securities of an equal amount maturing between 2027 and 2033.
Sudha

Updated: Jun 30, 2020 07:28:27 pm

RBI to conduct OMO to boost liquidity

30 June 2020 Current Affairs:The Reserve Bank of India (RBI) has announced that is is to conduct special "Open Market Operations (OMO)" on 2 July 2020. The aim is to pump up liquidity in the financial system.

Highlights:
♦ RBI's special OMO session will see the simultaneous purchase and sale of government securities for Rs.10,000 crore. 
♦ RBI will sell short-term securities, that worth Rs.10,000 crore, that are maturing in the current band next year and purchase long-term securities of an equal amount maturing between 2027 and 2033.
♦ The move by the Central Bank is expected to improve both liquidity and bond yields.

Open Market Operations (OMO):
Open market operations (OMO) refers to a central bank's buying and selling of government securities in the open market in order to expand or contract the amount of money in the banking system. Securities' purchases inject money into the banking system and stimulate growth, while sales of securities do the opposite and contract the economy.
In a multiple price-auction, each successful bidder pays the price stated in his bid. In case of 'uniform price' auctions, all successful bidders pay the same price that is the cut-off price at which the market clears the issue.
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