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In fight against virus, will RBI give cash or its wallet to the government?

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During times of stress, the Reserve Bank of India (RBI) has stepped up its efforts to support the government raise funds from the market at reasonable rates.

After all, the private sector could borrow cheap only if the government got its money at a low cost. So, in view of the covid-19 outbreak, it is not unreasonable to expect the central bank to swallow government bonds through open market operations (OMOs).

Analysts are expecting RBI to enhance its bond buying exponentially, perhaps even swallowing 70% of the borrowing ( ₹7.9 trillion) for the current year.

Recall that in FY19, RBI had ended up absorbing that much through OMO purchases, although the compulsions back then were about liquidity. “They will have to do large OMOs of course,"

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