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Daily Current Affairs – 2020

Topic: For Prelims and Mains

‘Operation Twist’

Why in news?

RBI has conducted a special open market operation (OMO) similar to the ‘Operation Twist’ carried out in the United States near the start of the decade.

More about:

  • RBI will conduct simultaneous purchase and sale of government securities under Open Market Operations (OMO) for 10,000 crore each.
  • It will purchase the longer-term maturities (i.e. government bonds maturing in 2029), and simultaneously sell the shorter duration ones (i.e. short-term bonds maturing in 2020).
  • The eligible participants can bid or submit offers in electronic format on RBI’s Core Banking Solution (E-Kuber).

Operation Twist:

  • Operation Twist is when the central bank uses the proceeds from the sale of short-term securities to buy long-term government debt papers, leading to easing of interest rates on the long term papers.
  • Operation Twist first appeared in 1961 as a way to strengthen the U.S. dollar and stimulate cash flow into the economy.
  • In June 2012, Operation Twist was so effective that the yield on the 10-year U.S. Treasury dropped to a 200-year low.

Open Market Operations (OMO):

  • It is one of the quantitative i.e. to regulate or control the total volume of money, monetary policy tools which is employed by the central bank of a country to control the money supply in the economy.
  • OMOs are conducted by the RBI by way of sale or purchase of government securities to adjust money supply conditions.
  • The central bank sells government securities to remove liquidity from the system and buys back government securities to infuse liquidity into the system.
  • These operations are often conducted on a day-to-day basis in a manner that balances inflation while helping banks continue to lend.
  • RBI carries out the OMO through commercial banks and does not directly deal with the public.
  • The RBI uses OMO along with other monetary policy tools such as repo rate, cash reserve ratio and statutory liquidity ratio to adjust the quantum and price of money in the system.

Fact For Prelims

EChO Network :

  • EChO Network would develop a national network to catalyse a new generation of Indians who can synthesize interdisciplinary concepts and tackle real-world problems in medicine, agriculture, ecology, and technology.

Gandhi Citizenship Education Prize:

  • Portugal announces Gandhi Citizenship Education Prize.
  • It will be dedicated to social welfare.
  • This would be an award given annually and the first edition will be dedicated to animal welfare.

 

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