oppn parties RBI's Version Of Operation Twist Achieves The Desired Result, For Now

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  • Kolkata witnesses traffic snarls on the first day of the Durga Puja festival as revellers start pnadal-hopping
  • Neha Bora was subsequently released and Dipke is to appear before a magistrate today at noon
  • Delhi Police detained Cockroach Janta Party founder Abhijeet Dipke, Neha Bora of AISA, student leaders and supporters ahead of a rally in Connaught Place demanding Chief Election Commissioner Gyanesh Kumar's resignation. The protest followed the detention and jailing of two CJP leaders earlier in the week over demonstrations at Jantar Mantar
  • The Reserve Bank of India is considering further monetary tightening to counter capital outflows and increase the cost of betting against the rupee, according to bankers and analysts cited by Reuters. The measures follow recent rate increases and steps to drain liquidity as pressure on the currency and inflation concerns persist
  • India directed oil marketing companies to stop diverting sugar-based feedstocks for ethanol production in the 2026–27 supply year, according to a new tender issued on Friday. The companies have invited bids for 11 billion litres of ethanol made from alternatives including corn and broken rice, amid concerns about domestic sugar supplies and prices
  • Finance Minister Nirmala Sitharaman said India's trade imbalance with China was growing sharply and attributed the problem partly to restrictions on Indian goods and services entering the Chinese market. China subsequently said it was ready to work with India to address mutual economic and trade concerns; India's trade deficit with China reached $69 billion in the first half of FY2026–27, up 27% year-on-year
  • Indian equity benchmarks extended their recovery on Friday, with the Sensex rising 413.66 points to close at 74,729.27 and the Nifty 50 gaining 148.80 points to settle at 23,146.15. Information technology shares, including Tech Mahindra, Infosys and TCS, helped lift the indices
  • India defeated Zimbabwe by four wickets in the opening women's T20 International in Raipur, taking a 1–0 lead in the three-match series. Deepti Sharma and Niki Prasad combined in an 82-run stand after India's top order collapsed, helping the hosts chase down Zimbabwe's total of 114 for five
  • Indian wrestler Komal won bronze in the women's 59 kg category at the Under-23 World Wrestling Championships in Las Vegas, defeating Kazakhstan's Viktoriia Khusainova 7–2. Fellow Indian Amruta Pujari advanced to the women's 72 kg final after recording two pinfall victories
  • Indian shuttler Jagsher Singh Khangurra secured a bronze medal at the BWF World Junior Badminton Championships in Cairo
  • The Supreme Court of India upheld the Bombay High Court's decision quashing the 2020 write-off of ₹8,415 crore in additional tier-1 bonds issued by Yes Bank (Yes Bank). The court ruled that the bank's administrator lacked the authority to extinguish the bonds under the final reconstruction scheme, strengthening bondholders' claims
  • The Supreme Court issued notices to the Election Commission of India, Delhi Police and opposition leaders, including Rahul Gandhi and Akhilesh Yadav, in separate petitions concerning electoral-roll revision and protests held in Delhi on October 10–12. The court also directed the preservation of CCTV footage linked to allegations of police excesses
  • The Supreme Court ruled that a person converting from Hinduism to Islam cannot automatically claim backward-class reservation benefits in the new religious community solely on the basis of their previous caste status. The judgment upheld the Madras High Court's decision striking down a 2024 Tamil Nadu government order that permitted such certification for specified communities
  • The Election Commission of India ordered a Special Summary Revision of electoral rolls in 14 states and three Union Territories, using January 1, 2027, as the qualifying date for voter eligibility. The draft rolls are scheduled for publication on November 12, claims and objections will be accepted until December 11, and the final rolls are due on January 4, 2027
Delhi HC refuses to ban CJP's Tiranga rally at Central Park in Connaught Place today /////// Police says will control and regulate it /////// NDMC closes the park for the public on Friday and Saturday
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RBI's Version Of Operation Twist Achieves The Desired Result, For Now

By Sunil Garodia
First publised on 2019-12-25 18:43:08

About the Author

Sunil Garodia Editor-in-Chief of indiacommentary.com. Current Affairs analyst and political commentator. Author of Cyber Scams in India, Digital Arrest, The Money Trap and The Human Hack

The RBI, for the first time, announced that it would simultaneously buy and sell government bonds in an open market operation (OMO) designed on the lines of Operation Twist in the US several decades ago. This operation is mainly conducted to calm down the long-term bond market in times of downturns in the economy. It is a market operation designed to bring long-term bond yields closer to the repo rate.

The RBI was worried because despite reducing the repo rate by a cumulative 135 basis points since January 2019, it has not been able to make the financially stressed banks in India to pass on more than 50 basis points to the end-user. It tried mandatorily linking the lending rate to an external benchmark, including the repo rate, but to no avail. As a result, and with fiscal slippage on part of the government and rising inflation, the 10-year G-Sec market saw a spurt in yield which went up to 6.8% just before the RBI announced the OMO.

Basically, the RBI decided to buy Rs 10000cr worth of G-Sec maturing in 2029 and simultaneously sold those maturing in 2020 for the same amount. The immediate result of this was that yields came down on the long-term bonds by around 20 basis points on the day the announcement was made. Also, the yield on shorter-term bonds (up to five years) rose by 16 basis points. That resulted in flattening the yield curve. It also helps in reducing the borrowing cost for the government. It is also beneficial for the retail customer as high yields on long-term bonds make banks jack up interest rates on lending. If rates for long-term bonds come down, banks will reduce their lending rates. That is also one of the unsaid objectives of the OMO -  to make banks lower lending rates.

But experts are not convinced about the long term efficacy of the operation. Yet, almost all agree that it will have a salutary effect in the short term and take the heat out of the long-term bond yields. But Operation Twist was never designed as a permanent policy tool. It has to be used sparingly whenever it is seen that excess liquidity creates a rally in the short-term bonds market and pushes up the yield of the long-term bonds. For now, the RBI operation seems to have had the desired effect. But if inflation keeps on rising and fiscal targets are not kept under manageable limits, long-term bonds market will heat up again. Then, no amount of OMOs will be able to bring them down.

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