As per media reports, dated August 25, 2020, the Reserve Bank of India announced sale and purchase of government securities worth ` 20,000 crore to conduct open market operation (OMO) in two tranches of ` 10,000 crore each, on August 27 and September 3, after reviewing the ‘current and evolving liquidity and market conditions.’
OMOs enable a central bank to adjust liquidity—supply of money—in the banking system by trading government bonds with commercial banks. The RBI decides on the quantum of sale/ purchase of securities, and has the power to accept or reject any bids either wholly or partially without assigning any reasons.
On August 6, the RBI’s Monetary Policy Committee had unanimously decided to pause interest rates and maintain its ‘accommodative’ stance for as long as necessary to revive economic growth, and mitigate the impact of Covid-19, while ensuring inflation remains within target.
The RBI has already reduced the repo rate by a total of 115 basis points since February, on top of the 135 basis points in an easing cycle last year, from 6.50 per cent. The bank expects the country’s real GDP to remain in a contractionary mode in both the first half and all of financial year 2020-21.
RBI’s Releases its Annual Report: 2020