In a bid to lower interest rates on long-term government bonds, the Reserve Bank of India (RBI) on Tuesday, August 25, said that it has decided to conduct simultaneous purchase and sale of government securities under Open Market Operation (OMO) for an aggregate amount of ₹20,000 crores in two tranches of ₹10,000 crores each.
The auctions will be held on August 27 and September 03 this year, the RBI said.
The RBI also added that it will buy government securities including 6.18 per cent, 8.24 per cent, 5.79 per cent and 7.95 per cent maturing on November 4, 2024, February 15, 2027, May 11, 2030 and August 28, 2032, respectively.
While the RBI will sell securities that mature between October 2020 and November 2020.
"Eligible participants should submit their bids/offers in electronic format on the Reserve Bank of India Core Banking Solution (E-Kuber) system between 10:00 am and 11:00 am on August 27, 2020," the RBI stated. Meanwhile, the central bank also said that the results of the auction will be announced on the same day.
What is Operation Twist
In the bond market, the central bank's OMOs under which bonds are simultaneously purchased and sold is known as 'Operation Twist'.
Under the Open Market Operation, the RBI buys long-term bonds and sells short-term government securities (G-Secs) simultaneously.
Earlier in October, the RBI had conducted OMO worth Rs 10,000 crore to maintain liquidity.
With the heightening of the novel coronavirus pandemic risks, the RBI said that it will continue to constantly review current and evolving liquidity and market conditions and take measures as appropriate to ensure the orderly functioning of financial markets.