Recently, the Reserve Bank of India (RBI) has announced several measures to ensure orderly market conditions and smooth financial conditions.
These measures include two more tranches of special Open Market Operations (OMOs) in bonds and a hike in the Held-To-Maturity (HTM) limit under the Statutory Liquidity Ratio (SLR) for banks.
Operation Twist is the name given to a USA Federal Reserve monetary policy operation, which involves the purchase and sale of government securities to boost the economy by bringing down long-term interest rates.
It is now being used for similar measures taken by RBI in Indian context as well.
Open Market Operations is the simultaneous sale and purchase of government securities and treasury bills by RBI.
The objective of OMO is to regulate the money supply in the economy.
RBI carries out the OMO through commercial banks and does not directly deal with the public.
OMO is one of the quantitative tools that RBI uses to smoothen the liquidity conditions through the year and minimize its impact on the interest rate and inflation rate levels.
