What is the OMO that RBI is conducting and what does it really do?
Answer
Answer
RBI will purchase government securities under open market operations OMOs for an amount of Rs.10,000 crore on September 24. These will be purchased through an auction using the multiple price method. The results will be announced on the same day.
Open market operations or OMOs are conducted by the RBI to manage liquidity in the market. Normally, the RBI would sell securities in the market to absorb liquidity and it will buy securities to infuse liquidity into the system. In this case the idea to infuse liquidity.
RBI also does something called Twists, which had last done on September 7. The Twist is a special round of simultaneous sale and purchase of government securities or G-Secs worth Rs.10,000 crore each. This is more to adjust the yields across maturity spectrums.