The Reserve Bank of India announced new measures today to maintain stability in the financial system during the coronavirus pandemic, including two more tranches of special open market bond operations in its 'Operation Twist'.
"The RBI remains committed to use all instruments at its command to revive the economy by maintaining congenial financial conditions, mitigate the impact of Covid-19 and restore the economy to a path of sustainable growth while preserving macroeconomic and financial stability," the central bank said in a statement.
Indian bond yields had risen in recent weeks due to high government borrowing, rising inflation and reduced expectations of interest rate cuts following the release of minutes of the RBI's monetary policy committee's latest meeting."It's a band aid for the market but the steps also show RBI doesn't have space for outright OMOs ," said A. Prasanna, chief economist at ICICI Securities Primary Dealership.
The bank said that it will also conduct term repo operations for a total of 1 trillion rupees at the current repo rate in mid-September to assuage pressures from advance tax outflows.