To maintain the financial stability in the wake of coronavirus outbreak, Reserve Bank of India (RBI) today said that it will open market operation on March 20 in the form of the purchase of an aggregate amount of Rs 10,000 crore of government securities with tenor between two and five years.
‘With the heightening of Covid-19 pandemic risks, certain financial market segments have been experiencing a tightening of financial conditions as reflected in the hardening of yields and widening of spreads. It is important to ensure that all market segments remain liquid and stable, and function normally,’ RBI said.
The benchmark 10-year bond yield slipped to 6.24 per cent after RBI announced it bond purchase decision. The central bank has in recent months used liquidity tools instead of rate cuts to bring down borrowing costs in the economy. It adopted a mix of the Federal Reserve-style ‘Operation Twist’ and the long-term repurchase operations (LTRO) that boost cash in the banking system. RBI chief Shaktikanta Das on Monday announced another Rs 1 lakh crore of LTROs and a second swap auction to inject dollars after the first auction received bids for more than double the $2 billion on offer.
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