1. Open market operation (OMOs) could mean various kinds of central bank operations which impact the supply of [[Reserve Money#^21a148|reserves]] in the system, such as: 1. outright purchase/sale of securities issued by the government or the central bank’s own bills (outright OMOs); 2. repo or reverse repo operations (reversible OMOs); and 3. forex operations/swaps 2. ==In India, however, outright purchase or sale of Government of India dated-securities resulting in injection/absorption of durable liquidity are classified as OMO (open market purchase/open market sale), while temporary liquidity managed through repurchase transactions (repos and reverse repos) are called Liquidity Adjustment Facility (LAF) operations. LAF was introduced in June 2000. 3. It is one of the tools for implementing monetary policy framework, be it inflation targeting, monetary targeting, currency boards, 4. and exchange rate targeting, and help to adjust the supply of primary liquidity (base money) in an economy, thus influencing total money stock and providing stability to the economy. 5. When banks participate in OMOs, it shows that banks want funds to lend and generate a higher return compared to the return (YTM) on dated G-secs (usually central govt.) sold to the RBI. 6. *An example of OMOs as liquidity management/altering tool:* 1. Several countries undertook large scale asset purchases to inject liquidity – mainly of government bonds – in the aftermath of the global financial crisis (GFC) and the COVID-19 pandemic. Here, the target was the amount (like QE in US) and the long-term yields (like the yield curve control in [Japan and Australia](https://rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=21536#FN3)) thereby long-term lending rates. 1. Japan: It has adopted a [policy](https://ideas.repec.org/h/pal/intecp/978-1-137-52958-9_2.html) by which the BoJ signals its strong [commitment](https://www.boj.or.jp/en/about/press/koen_2016/data/ko161009a.pdf) to price stability while purchasing massive amounts of JGBs, including bonds with longer residual maturities to actively influence expectation formation of private entities. 2. Outright OMOs help to adjust the **durable liquidity** to keep the banking system/systemic liquidity in sync with the monetary policy stance. 1. Example: Bond purchases may happen to inject durable liquidity if the system liquidity is in deficit. 2. ==OMOs also gradually replaced the cash reserve ratio (CRR) as a flexible tool for management of durable liquidity. Rather, they supplanted the cash reserve ratio (CRR). == 3. In 2018-19, the RBI resorted to large scale OMO purchases to inject liquidity. 3. [OMOs to sterilise capital flows](Forex%20Market%20Interventions%20and%20Sterilisation.md#2.%20Open%20Market%20Operations) - In EMEs such as India, OMOs, along with sale of [[Market Stabilisation Scheme (MSS), 2004|MSS]] bonds, also serve the additional purpose of **sterilising** the monetary impact of large capital inflows arising out of the search for yields and the policy spillovers from central banks of advanced economies. (Raj et al., 2018). 4. When a central bank purchases G-secs through OMOs, it **increases the (excess) reserves** of commercial banks thereby enabling the latter to expand their loan and investment portfolios. This supports or increases the price of G-secs and reduction in their yields; leading to reduction in the interest rates of financial instruments that are priced based on the risk-free rate, i.e., G-sec yield, thereby stimulating economic activity. When a central bank sells G-Secs, the **impact is opposite.** 5. ==Thus, OMOs provide greater flexibility to central banks in conducting monetary policy through the market mechanism – the discretion to determine the timing and volume of monetary operations – rather than resorting to direct controls to regulate system-wide liquidity (Axilrod, 1997). == 6. Here the aim is signalling RBI’s intent on medium-to long-term interest rates (G-sec yields), that is the yield-curve management through liquidity operation. So T-bills, and CMBs are not used in OMOs. They used under [Market Stabilisation Scheme (MSS), 2004](Market%20Stabilisation%20Scheme%20(MSS),%202004.md), or CMBs alone have been issued in August 2013 to absorb rupee liquidity amid weakening Rupee. 7. _A mere OMO [announcement](https://rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=21536#:~:text=in%20the%20market%20(-,Arora%20et%20al.%2C%202021,-).%20While%20a%20quantity) can immediately moderate the yields/risk premium in anticipation of reduced net supply of government bonds in the market (Arora et al., 2021)._ 7. They also help considerably in [reducing](https://rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=21536#:~:text=thus%20considerably%20reducing%20the%20lags%20of%20monetary%20policy%20(Mishkin%2C%201997).) the **lags of monetary policy** (Mishkin, 1997). *This additional benefit adds flexibility to RBI's approach while proactively managing liquidity conditions in consonance with the prevailing monetary policy stance.* 8. Example of OMOs: In [2017-18](https://www.rbi.org.in/commonman/english/Scripts/PressReleases.aspx?Id=2219#:~:text=4.%20Management%20of%20Surplus%20Liquidity), surplus liquidity was absorbed by OMOs, operations under MSS, and issuances of CMBs. 9. **Yield Curve:** OMOs can help to discover market sentiments and facilitate the orderly evolution of the yield curve, viz. prevent volatility in the risk-free yield, which is deemed as a [public good]() (RBI, 2020). 1. **An example:** On December 19, 2019, special OMOs were conducted, viz. the simultaneous purchase and sale of G-secs, referred as <span style="background-color: #fff9ae"> Operation Twist (OT) </span> based on the federal reserve's similar operation in the past. 1. After no rate cut by MPC on Dec 5, 19, the yields on the 10-year benchmark jumped by 14 bps from 6.47% to 6.75% on December 19, 2019 on expectations of higher borrowing by govt., though the yields on short-tenor government securities, i.e. the short-end of yield curve, did not move much due to liquidity surplus. To resolve this, RBI decided to ==conduct special OMOs involving simultaneous purchase of longer-dated securities and sale of short-tenor securities.== 1. [Subsequent events](https://rbi.org.in/Scripts/BS_ViewBulletin.aspx?Id=19658#:~:text=After%20the%20Union%20Budget%20announcement%20on%20February%2001%2C%202020)like the liberalisation of capital account by fulling opening some select G-Secs for FPIs , no additional borrowing in the budget, announcement of LTROs, [[Liquidity Adjustment Facility (LAF)#^04e5b5|revised]] liquidity management framework pushed the G-sec yields to the [lowest](https://rbi.org.in/Scripts/BS_ViewBulletin.aspx?Id=19658#:~:text=than%20a%20decade-,(Chart%206).,-Abundant%20liquidity%20anchored) level in a decade. 2. In an OT, there is purchase in a select maturity segment through sales of maturities of almost identical amount. Thus they are almost liquidity neutral. Thus, are usually liquidity neutral 3. While OMO purchases lower the level of yields across a given maturity/term, OT alter the slope of the yield curve as they target specific maturities (Patra and Bhattacharyya, 2022). 4. They only alters the maturity profile of the portfolio of G-secs as the operations involves selling short-term securities while buying longer-term ones (or vice versa), and there will be a net increase in reserve money and expansion of balance sheet, only to the extent that the amounts in two transactions do not fully offset each other, viz. sale does not fully offset the quantum of purchase. 5. The [US Federal Reserve](https://www.stlouisfed.org/publications/regional-economist/july-1993/to-boldly-go-where-we-have-gone-before-repeating-the-interest-rate-mistakes-of-the-past) made a maiden use of this tool in February 1961. 10. Usually central banks use OMOs to adjust money supply and hence steer short-term interest rates which, in turn, influence longer-term rates and overall economic activity. 11. Thus OMO auctions conducted by the central bank impacts ==the amount of liquidity in the economy, government bond yields and certain financial market instruments in terms of price, volume and volatility transmission. 12. OMOs were in liquidity absorption mode through the second half of the 1990s and into the early 2000s. 13. Buying in OMOs do not necessarily mean an increase fiscal deficit of the government. These are bonds which have already been issued by RBI and therefore they are already accounted in government borrowings. So OMOs are just transfer of these bonds from the banks and public to RBI. ==But indirect purchases do influence the deficits.== 14. If RBI participates in the primary auction, which it does not do after the introduction of the [[OPEN FRBM Act, 2003 - The Fiscal Responsibility and Budget Management Act|(FRBM) Act, 2003]], it is a direct supply of money to govt., which adds to govt. borrowings. 15. **Platform:** 1. OMOs are done are through auction route (e-KUBER software) or on NDS-OM. This [table](https://www.rbi.org.in/Scripts/BS_ViewBulletin.aspx?Id=21536#:~:text=of%20forex%20interventions.-,Table%201%3A%20Open%20Market%20Operations,-(%E2%82%B9%20crore)) shows yearly details of OMOs from 2013-14 to 2021-22. 2. ==Bulk amounts are done through notified OMOs but [creeping OMOs](https://rbi.org.in/scripts/BS_SpeechesView.aspx?Id=1305#:~:text=Issue%20regarding%20notified%20OMO%20and%20doing%20OMO%20through%20NDS%2DOM) happen on NDS-OM (for smaller amounts). Overall, the choice is based on assessment of liquidity situation. Here's a brief note on [NDS-OM](Outright%20Transactions%20in%20G-Secs%20in%20Secondary%20Market.md#NDS-OM). 1. **Retail Participation in OMOs:** 1. Retail investors cannot directly buy/sell in RBI’s OMOs. 2. They can participate in [[Outright Transactions in G-Secs in Secondary Market#NDS-OM Retail|primary auctions]] through Retail Direct platform or trade them in secondary market through Retail Direct platform or on the [[Outright Transactions in G-Secs in Secondary Market#Stock Exchanges|exchanges]]. 16. **Securities:** 1. OMOs are conducted only in dated (bonds) central or state Government Securities (G-secs). 2. On [October 22, 2020](https://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=50524), the first auction (purchase) under OMOs in (of) SDLs took place, after the OMOs were announced in the Statement on Developmental and Regulatory Policies dated [October 9](https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=50480). 3. In [[RBI_Annual Report_2021.pdf#page=151&selection=115,9,120,13|2020]], 3 OMO purchase auctions of SDLs were conducted between October and December, aggregating ₹30,000 crore across 75 securities *(calculated from the press releases)*. 4. As of Jan-2026, RBI has not conducted OMOs in (of) SDLs after Oct-2020. It may consider if the spreads (difference between yields on state bonds and central govt. bonds) widen beyond a certain level. 5. Apart from OMOs in dated securities, RBI also sells 17. **Timings:** The OMO auctions are conducted mostly between [9:30 AM and 10:30 AM](https://rbi.org.in/scripts/PublicationReportDetails.aspx?ID=1292#:~:text=The%20OMO%20auctions%20are%20conducted%20mostly%20between%209%3A30%20AM%20and%2010%3A30%20AM.) on E-Kuber, the Core Banking Solution (CBS) platform of RBI. The settlement of the OMOs is done on T+1 basis, between noon and 4:00 PM. 18. **Balance Sheet:** 1. OMO purchases increases the size of the balance sheet and reserve money by increasing the total portfolio of G-secs owned by the central bank. 2. OMO sales leads to reduction in both, viz. the balance sheet size and reserve money. 3. Under Section 33(1) of the RBI Act, 1934, GOI securities form one of the main assets of the Issue Department of the Bank. 19. **Outstanding securities:** 1. The details of all the outstanding dated securities issued by the Government of India are available on the RBI website at [http://www.rbi.org.in/Scripts/financialmarketswatch.aspx](https://www.rbi.org.in/Scripts/financialmarketswatch.aspx). 20. **Liquidity:** 1. It can be analysed based on the following [indicators](https://rbi.org.in/scripts/PublicationReportDetails.aspx?ID=677#f2:~:text=liquidity%20of%20the%20G%2DSec%20market%20based%20on%20the%20following%20indicators%3A%20Volume%20traded%2C%20turnover%20ratio%2C%20outstanding%20amount%20of%20the%20security%2C%20availability%20of%20a%20price%2C%20time%20span%20of%20reissuance%20of%20a%20security%2C%20bid%2Dask%20spread%20and%20impact%20cost.): Volume traded, turnover ratio (trade value to the outstanding value), outstanding amount of the security, availability of a price, time span of re-issuance of a security, bid-ask spread and [impact cost](https://www.niftyindices.com/resources/index-concepts/impact-cost). 2. The secondary market trading in G-Sec is not available for all the securities. 21. **G-SAP:** ^fc9c8c 1. It was [first](https://rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=51380#:~:text=17.%20For%20the%20year%202021%2D22%2C) announced on April 7, 2021. 2. On April 8, 2021, the first phase of G-SAP 1.0 operations was [announced](multi-security auction using the multiple price method) for April 15, 2021. 3. The [second](https://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=51564) auction was announced on May 12, 2021 for May 20, 2021. It helped to restore the liquidity drained to restoration of CRR back to pre-pandemic levels of 4% of NDTL, effective May 21, 2021. 4. The aim was to stabilise the bond yields, by an upfront commitment by RBI to a specific amount of open market purchases of government securities. 5. The [third](https://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=51712) auction was [announced](https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=51682) on June 04, 201 for June 17, 2021. 6. They were multi-security auction using the multiple price method. 7. It is run in conjunction with regular OMOs, Operation Twist, or temporary liquidity operations through LAF, long-term repo/reverse repo auctions, forex operations. All these [tools](https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=51682#:~:text=liquidity%20conditions%20evolve%20in%20consonance%20with%20the%20stance%20of%20monetary%20policy%20and%20financial%20conditions%20remain%20supportive%20for%20all%20stakeholders.) help RBI to maintain liquidity conditions in consonance with the stance of monetary policy and keep the financial conditions supportive for all stakeholders. 8. A total of ₹60,000 crore was injected under G-SAP 1.0. 9. On Jul 05, 2021, the second phase of G-SAP for July 08, 2021, viz. G-SAP 2.0 was [announced](https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=51854), and was undertaken in  Q2:2021-22 for an amount of ₹1.20 lakh crore. 10. A total of ₹40,000 crore was injected under G-SAP 2.0. 11. Before G-SAP, on September 1, 2020, RBI had [increased](https://www.rbi.org.in/commonman/english/Scripts/PressReleases.aspx?Id=3265#:~:text=SLR%20Holdings%20in%20Held%20to%20Maturity%20(HTM)%20category) the upper limits under Held to Maturity (HTM) category from 19.5 % to 22% of NDTL. It [opened](https://rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=51380#:~:text=In%20addition%2C%20the%20extension%20of%20Held%2Dto%2DMaturity%20(HTM)%20dispensation%20opens%20up%20space%20for%20investments%20of%20more%20than%20%E2%82%B94.0%20lakh%20crore) up space for more than ₹4.0 lakh crore. 1. HTM is not a regulatory compulsion but a [forbearance](https://rbi.org.in/scripts/PublicationReportDetails.aspx?ID=677#f2:~:text=HTM%20is%20not%20a%20regulatory%20compulsion%20but%20a%20forbearance%20available%20to%20banks.) available to banks and usage of the limit always has direct ==impact on the liquidity of these instruments in the secondary market.== 22. <span style="background-color: #ecf9ee ; font-weight: 500">Few OMOs:</span> 1. RBI also conducted OMOs in 17-18 to moderate the systemic liquidity towards neutrality after expecting the liquidity hangover from demonetisation to persist. 2. The forex market operations of the__Reserve Bank of India alter domestic liquidity conditions which are then offset/neutralised consistent with the stance of monetary policy. 3. In 18-19, OMO purchases amounted to ₹2.99 lakh crore to ==infuse durable liquidity and manage/negate/reverse the enduring liquidity impact of forex interventions (sales).== ## A Global Perspective 1. After the global financial crisis (GFC), central banks in AEs reduced interest rates (a conventional monetary policy tool) until short-term rates reached the effective lower bound (ELB) – close to zero. But this limited further rate reductions. 2. They resorted to 'unconventional monetary policy options' to circumvent this ELB problem, like purchase of long-term bonds to further reduce long-term rates and ease monetary conditions. ## History >[!cyan] > 1. The RBI has been conducting OMOs since its inception in 1935, but those operations were mainly undertaken in pound sterling > 2. The RBI Annual Report of 1948 mentioned OMO purchase of G-secs for the first time; thereafter, a few years later, sharp movements in money supply were attributed to OMO purchases of G-secs. > 3. By the 1980s, the efficacy of OMOs, however, as a monetary policy instrument was blunted (Das, 2020), due to: > 1. an underdeveloped G-secs market; > 2. a system of administered rates; > 3. a captive investor base (banks) for G-secs ensured through periodic hikes in the statutory liquidity ratio (SLR); and > 4. deficit financing induced surplus liquidity conditions which reduced banks’ reliance on central bank funding. > 4. **Auctions:** In 1992, post the initiation of economic reforms, the government borrowing programme was conducted through auctions for the first time. This marked the shift towards market-based pricing of G-secs. This section has more details on the [[G-Secs-Primary Market#^f1e0a4|primary market]]. > 1. Prior to introduction of auctions as the method of issuance, the interest rates were administratively fixed by the Government. > 2. With the introduction of auctions, the rate of interest (coupon rate) gets fixed through a market-based price discovery process. > 3. It marked the progressive liberalisation of the economy. > 4. With this, OMOs emerged as a key instrument. > 5. In [1995](https://rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=10476), [[Primary Dealers (PDs)|Primary Dealer System]] was initiated. #PDs > 1. PDs are mandated to underwrite issuances of central government dated securities and participate in primary auctions. > 2. They are also mandated to achieve a minimum success ratio (bids accepted as a proportion to bidding commitment) of 40 per cent in primary auctions of Treasury Bills (T-bills) and Cash Management Bills (CMBs), assessed on a half-yearly basis. > 3. In absence of PD system, RBI made offers to select participants providing them competitive prices and tenure. > 6. In 1997, **automatic monetisation of fiscal deficit** came to an end in 1997 after RBI discontinued practice of issuing ad hoc Treasury bills (T-bills), and the SLR was also reduced to the then prevailing floor of 25% of NDTL in October 1997 and, thereafter, continued to be reduced gradually. Also, this floor of 25% and cap of 40% was [removed](https://thc.nic.in/Central%20Governmental%20Ordinances/2007/2007.01.pdf) in 2007 after the amendment to the Banking Regulation Act of 1949. > 7. **Sterlisation:** From the second half of the 1990s to 2003-04, the RBI took frequent recourse to OMO sales to modulate the liquidity impact of capital inflows, which surged on account of search for yields and policy spillovers from AE central banks. > 8. **Transient Liquidity:** Repos/Reverse Repos (reversible transactions) with introduction of [[Liquidity Adjustment Facility (LAF)|LAF]] in June 2000. > 9. In Feb. 2002, NDS and CCIL became operational. > 10. Delivery-versus-payment’ (DVP) system in the government securities market was introduced in [1995](https://www.fimmda.org/uploads/general/01agrs08091.pdf). > 11. From April 2002, guaranteed settlement of trades in G-Sec was provided by CCIL. It was under DvP-II mode. > 12. From 2 April 2004, the settlement of G-Sec trades on [DvP-III](https://www.rbi.org.in/commonman/English/Scripts/FAQs.aspx?Id=711#:~:text=18.%20What%20is-,Delivery%20versus%20Payment%20(DvP)%20Settlement%3F,-Delivery%20versus%20Payment) basis was introduced in April 2004 > 13. In [August 2005](https://www.rbi.org.in/Upload/Notification/Pdfs/66901.pdf), the electronic platform for anonymous trading in G-Sec (NDS-OM) was launched. > 14. **Price Discovery:** The setting up of NDS-OM brought in pre-trade and post-trade transparency in the G-Sec market that led to efficient price discovery in the secondary market. > 15. **Volumes:** The ease of trading through the electronic platform with net settlement of trades (on DvP-III basis), CCP guarantee, the standardization of settlement cycle, computation of accrued interest, etc. improved volumes in the secondary market for government securities. > 16. **RBI's withdrawal from primary market:** Consequent to the enactment of the Fiscal Responsibility and Budget Management (FRBM) Act, 2003, RBI’s discontinued direct purchases of G-Secs from the primary market in 2006, which in a way, facilitated the emergence of OMOs as a key tool for liquidity [management](https://rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=21536#FN5). > 17. In [2006](https://rbi.org.in/Scripts/NotificationUser.aspx?Id=2862&Mode=0), the RBI allowed [transactions](https://rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=11344) in the ‘When Issued’ (WI) market in Central Government Securities. > 18. **Financial stability tool:** When the GFC flared up in 2008, the RBI, inter alia, undertook large scale OMO purchases amid the the financial market panic and “flight to safety”. > 19. **Liquidity Management:** In April 2016, the liquidity management framework was [[Liquidity Adjustment Facility (LAF)#^5bfc4e|revised]] in a move to progressively lower the average ex-ante (already existing) systemic/banking system liquidity deficit to a position closer to neutrality. it was achieved by the supply of the durable liquidity through OMO purchases, which also helped to manage or offset the liquidity drainage, viz. a movement of funds from the banking system to the public, due to currency leakage and FCNR-B redemptions during 2016-17. > 1. Banking system liquidity refers to the availability of reserve funds with the banks, the dominant financial intermediaries in India with preferred access to central bank liquidity. > 20. **Flexible Inflation Targeting:** From 2016 onwards, RBI formally adopted [Flexible Inflation Targeting](https://www.rbi.org.in/Commonman/English/Scripts/speeches.aspx?Id=3161#:~:text=2016%20onwards%3A%20Flexible%20Inflation%20Targeting), after a Monetary Policy Framework Agreement (MPFA) was signed between the Government of India and the Reserve Bank on February 20, 2015. This increased the importance of OMOs in the Reserve Bank’s repertoire of liquidity management tools. > 21. ==After demonetisation, cash management bills (CMBs) were also issued under the market stabilisation scheme [[Market Stabilisation Scheme (MSS), 2004|(MSS)]] for a limited period to absorb surplus liquidity.== > 22. From December 1, 2016, RBI [allowed](https://rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=10646) Foreign Portfolio Investors (FPIs), viz. FPIs, NRIs, in Government securities on NDS-OM platform through the primary members of NDS-OM including the Web-module. > 1. Investment limits for Foreign Portfolio Investors (FPI) for [FY24-25](https://rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=12675) . Such directions are issued under (certain sections) of the Foreign Exchange Management Act, 1999. > 2. For non-debt instruments, one may refer to Foreign Exchange Management (Non-debt Instruments) [Rules](https://incometaxindia.gov.in/Documents/Provisions%20for%20NR/FEM-Non-debt-Instruments-Rules-2019.htm), 2019. > 23. **Short-selling in G-Secs:** > 1. It was first proposed in [October 2005](https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=2539&Mode=0). > 2. On [February 26, 2006](https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=2764&Mode=0), RBI allowed [short-selling](https://rbi.org.in/scripts/FS_Notification.aspx?Id=11346&fn=6&Mode=0) in G-Secs, but only intra-day, to facilitate participation by different classes of investors. > 24. In 2020, [Request for Quote-RFQ](https://retail.ndsom.com/Help/index.html#rfq) was launched on NDS-OM, which allowed members to negotiate trades bilaterally. > 25. In 2020, RBI introduced [The Fully Accessible Route (FAR)](https://rbi.org.in/Scripts/NotificationUser.aspx?Id=11849&Mode=0) to enable Foreign Portfolio Investors (FPIs) to invest in [specified G-secs](14 [‘Fully Accessible Route’ for Investment by Non-residents in Government Securities – Additional specified securities dated July 07, 2022](https://rbi.org.in/Scripts/NotificationUser.aspx?Id=12354&Mode=0) and [‘Fully Accessible Route’ for Investment by Non-residents in Government Securities – Inclusion of Sovereign Green Bonds dated January 23, 2023](https://rbi.org.in/scripts/FS_Notification.aspx?Id=12444&fn=6&Mode=0) and [November 08, 2023](https://rbi.org.in/Scripts/NotificationUser.aspx?Id=12563&Mode=0)) without restrictions. > 1. List of 'specified securities' - [March 20, 2020](https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11850&Mode=0) and [January 23, 2023](https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12444&Mode=0). > 2. On November 08, 2023, sovereign green bonds were also [included](https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12563&Mode=0) in the 'specified G-Secs'. > 26. On December 27, 2023, RBI allowed [lending and borrowing of G-Secs](https://rbi.org.in/Scripts/NotificationUser.aspx?Id=12580&Mode=0). > > During the last decade, RBI conducted two-way OMOs extensively to inject (absorb) durable liquidity ([Table 1](https://rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=21536#T1)). > > OMOs have gradually gained importance in emerging market economies (EMEs) with the ==development of markets and the proliferation of instruments. ## BuyBack 1. [Repurchase (buyback)](https://www.rbi.org.in/scripts/FAQview.aspx?Id=79#:~:text=What%20is%20meant%20by%20repurchase%20(buyback)%20of%20G%2DSecs%3F) of G-Secs is a process whereby the Government of India and State Governments buy back their existing securities, by ==redeeming them prematurely==, from the holders. 2. The initial buyback was in [2003](https://rbi.org.in/scripts/Bs_viewcontent.aspx?Id=3277#:~:text=The%20response%20to%20the%20initial%20buyback%20offer%20in%202003%20was%20muted), which saw tepid response. 3. The objectives of buyback can be: 1. Reduction of cost (by buying back high coupon securities) to reduce their interest outflows in the times when interest rates show a falling trend. 2. Reduction in the number of outstanding securities and improving liquidity in the G-Secs market (by buying back illiquid securities) and infusion of liquidity in the system. 3. If the surplus cash balance is not auctioned, it may be used for the buyback. 4. States can also retire their high cost debt pre-maturely in order to fulfill some of the conditions put by international lenders like Asian Development Bank, World Bank etc. 4. Governments also make provisions in their [budget](https://www.indiabudget.gov.in/doc/eb/allsbe.pdf) for buying back of existing securities. 5. Buyback can be done through a reverse auction process (generally if amount is large) or through the secondary market route, i.e. NDS-OM (if amount is not large). 6. They add liquidity to the system, as bonds in HTM category are also eligible for sale in buybacks, which _can be_ used by banks to increase their profitability to buy other/long-tenor bonds if the yields are falling. 7. [[RBI_Annual Report_2013.pdf#page=105&selection=134,0,134,42|Buyback/ Switches for Liability Management by RBI]] ## OMOs from 2013-14 to 2021-22 1. [Table 1: Open Market Operations](RBI_Monthly_Bulletin_Article_202301_Open%20Market%20Operations%20in%20India%20–%20An%20Appraisal.pdf#page=4&selection=93,0,94,1) in Open Market Operations in India – An Appraisal, an article published RBI Bulletin-Jan 2023 ## Related Notes 1. [[Repos and Tri-Party Repo]] 2. [[Money Market Operations (MMO)]] 3. [[Reserve Money]] 4. [Forex Market Interventions and Sterilisation](Forex%20Market%20Interventions%20and%20Sterilisation.md) 5. [[State Development Loans]] 6. [[STRIPS]] 7. [[Fiscal-Monetary Policy Interface in India - OPEN]] 8. [[Fiscal-Monetary Co-ordination in India - An Assessment 2013 OPEN]] 9. [[Fiscal Policy and Economic Reforms OPEN]] 10. [[Financial Stability-Issues and Challenges. A speech by Dr Duvvuri Subbarao # References: ### [[Speeches & Media Interactions|Speeches]] 1. Shaktikanta Das. (Jan 24, 2020). ==Seven Ages of India’s Monetary Policy==. Speech by Shri Shaktikanta Das, Governor, Reserve Bank of India - January 24, 2020 - at the St. Stephen's College, University of Delhi. [Link](https://rbi.org.in/scripts/BS_SpeechesView.aspx?Id=1092) ### [[Publications (Data Releases) & Research#Publications|Publications]] 1. RBI. (Jan 19, 2023). ==Open Market Operations in India – An Appraisal==. RBI Bulletin-Jan, 2023. Authors-by Abhilasha, Bhimappa Arjun Talwar Krishna Mohan Kushwaha and Indranil Bhattacharyya. [Link](https://rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=21536) 2. RBI. Apr 18, 2012. "Creeping OMOs" in Edited Transcript of Reserve Bank of India’s Post Policy Conference Call with Researchers and Analysts. [Link]((https://rbi.org.in/scripts/BS_SpeechesView.aspx?Id=1305)) 3. RBI. (2020). Liquidity Management in the Time of Covid-19: An Outcomes Report==. RBI Bulletin-July, 2020. [Link](https://rbi.org.in/Scripts/BS_ViewBulletin.aspx?Id=19658) ### [Press Releases](https://rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx) 1. RBI (2020, Mar 18). RBI Announces OMO Purchase of Government of India Dated Securities \[Press Release 2019-2020/2082\]. [Link](https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=49534) 2. RBI. (2025, May 13). RBI Announces OMO Purchase of Government of India Dated Securities \[Press Release: 2025-2026/315\]. [Link](https://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=60430) ### Regulations 1. RBI. ==Master Direction – Operational Guidelines for Primary Dealers==. [Link](https://rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=10476) ### [Notifications](https://rbi.org.in/Scripts/NotificationUser.aspx) 1. Transactions in the ‘When Issued’ (WI) market in Central Government Securities. [Link](https://rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=11344) ### Others 1. CCIL. CCIL Debt Market Quarterly Report. [Link](https://www.ccilindia.com/web/ccil/india-debt-market-quarterly) 2. DEA (MoF, Govt. of India). [Quarterly](https://dea.gov.in/public-debt-management. ) Report on Public Debt Management by [Public Debt Management Cell](https://dea.gov.in/public-debt-management-cell). [Link](https://dea.gov.in/reports-public-debt-management) 1. It is released after a lag of one quarter. So the report for April-June 2023 is released in October. 3. Zaretsky, A. M. (1993, July 1). _To boldly go where we have gone before: Repeating the interest-rate mistakes of the past_. Regional Economist. Federal Reserve Bank of St. Louis. [Link](https://www.stlouisfed.org/publications/regional-economist/july-1993/to-boldly-go-where-we-have-gone-before-repeating-the-interest-rate-mistakes-of-the-past)