The Reserve Bank of India (RBI) has embarked on Quantitative Easing (QE) with the Government Securities Acquisition Programme (GSAP). This commits the central bank to buy Rs 1 trillion of government bonds off the secondary market in the first quarter (Q1) of financial year 2021-22 (FY22). If it runs at the same rate through the fiscal, this will significantly exceed RBI purchases of Rs 3.1 trillion in FY21.
In addition, RBI is holding policy rates low, and conducting open market operations such as “Operation Twist”. Here it sells short-term treasuries and buys long-term debt to control yield curves.
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