What are the operations of RBI?

The Reserve Bank of India conducts repo and reverse repo operations at various maturities: overnight, 7-day, 14- day, etc. These types of operations have now become the main tool of monetary policy of the Reserve Bank of India.

What is Operation Twist discuss its impact on banking sector in India?

Operation twist is a programme adopted by the central bank (RBI in India) for quantitative easing. In this programme the proceeds from the sale of short term securities is used to buy long term government debt papers leading to earning of interest rates on the long term papers.

What is repo operations by RBI?

Repo is a money market instrument, which enables collateralised short term borrowing and lending through sale/purchase operations in debt instruments. Under a repo transaction, a holder of securities sells them to an investor with an agreement to repurchase at a predetermined date and rate.

What is operational twist?

Simultaneous purchase and sale of government securities under OMOs is popularly known as Operation Twist. It involves buying long-end debt while selling short-tenor bonds to keep borrowing costs down. According to the central bank, it reserves the right to decide on the quantum of purchase/ sale of the securities.

What yield curve means?

A yield curve is a line that plots yields (interest rates) of bonds having equal credit quality but differing maturity dates. The slope of the yield curve gives an idea of future interest rate changes and economic activity.

Why was MSF introduced?

The reason being, the MSF window is opened by RBI to enable the scheduled commercial banks to borrow money in situations when there is no flow of cash in the market between banks. This system allows banks to get more amounts of money from RBI at a higher rate than the Repo rate.

When did Operation Twist begin?

Some Background. The U.S. Federal Reserve (the Fed) implemented the Operation Twist program in late 2011 and 2012 to help stimulate the economy.