New Delhi, August 25: The Reserve Bank of India on Tuesday announced to conduct simultaneous purchase and sale of government securities under Open Market Operation (OMO) of Rs 20,000 crore. The Special OMO of simultaneous purchase and sale of government securities will be conducted in two tranches of Rs 10,000 crore each on August 27, 2020, and September 03, 2020, respectively.

According to the notification issued by the RBI, the first multi-security auction will be conducted using the multiple price method on August 27, 2020. The RBI would purchase four securities and buy four at an aggregate amount of Rs 10,000 crore each. The apex bank will sell the securities whose maturities are ending in October and November 2020, while buy those whose maturities are ending between 2024 and 2032. RBI Monetary Policy: Repo Rate Unchanged at 4%, Reverse Repo Remains Unchanged at 3.3%.

Here's the RBI tweet:

Here are some key details about the Open Market Operations (OMOs):

What is OMOs?

OMOs are market operations conducted by RBI through sale/purchase of government securities to/from the market. The main objective is to adjust the rupee liquidity conditions in the market on a durable basis.

As per the norms, RBI resorts to sale of securities and sucks out the rupee liquidity in case of excess liquidity. While buys securities from the market and releases liquidity into the market if the liquidity conditions are tight. This method is one of the quantitative monetary policy tools through which RBI controls the money supply in the economy.

How to Apply for OMOs:

The RBI in its circular stated that all the eligible participants should submit their bids/offers in electronic format on the RBI Core Banking Solution (E-Kuber) system between 10 am and 11 am on August 27, 2020. However, the apex bank said that it will accept physical bids/offers only in the event of system failure. The RBI said that those physical bids/offers should be submitted to Financial Markets Operations Department before 11 am.

Meanwhile, RBI mentioned that it reserves the right to decide on the quantum of purchase/sale of individual securities, accept bids/offers for less than the aggregate amount, purchase/sell marginally higher/lower than the aggregate amount due to rounding-off and accept or reject any or all the bid/offers either wholly or partially without assigning any reasons. AIMTC Urges RBI to Extend EMI Moratorium for Road Transport Sector Till December 31 Amid Coronavirus Crisis.

The apex bank added that result of the auctions for first trance of OMOs will be announced on the same day, i.e, August 27, 2020. RBI said that successful participants should ensure availability of funds/securities in their Current account/SGL account by noon on August 28, 2020.

Earlier, RBI announced special open market operations of government securities worth Rs 10,000 crore on June 29 and said that it will conduct simultaneous purchase and sale of government securities under OMO for Rs 10,000 crores each on July 02, 2020. In December 2019, RBI for the first time in India's history conducted its version of 'Operation Twist' through simultaneously selling and purchasing government securities under OMOs.

(The above story first appeared on LatestLY on Aug 25, 2020 12:26 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).