The Reserve Bank of India or RBI has launched what is colloquially as “Operation Twist” under which a simultaneous purchase and sale of government securities will be conducted under open market operations (OMOs) for Rs 10,000 crore each on November 26.
This decision comes in the foreground of a potentially morbid review of the current Liquidity and Financial Conditions of the Banks by RBI.
The “Operation Twist” has been used a number of times before to stabilize the financial system by the RBI and has yielded many a notable results. It involves purchasing G-Sec of longer maturities and selling equal amount of G-Sec of shorter maturities.
On November 26, the RBI will purchase three government securities of different maturity dates aggregating to Rs 10,000 crore and sell two securities aggregating to the same amount using the multiple price auction method.
The RBI further said it reserves the right to decide on the quantum of purchase/sale of individual securities.
