RBI's Rs 50,000 Crore OMO Auction Draws Over Rs 1.32 Lakh Crore in Bids
In a strong indication of ample demand for liquidity, the Reserve Bank of India (RBI) received bids worth Rs 1.32 lakh crore in its Rs 50,000 crore open market operation (OMO) auction more than double the notified amount. This is part of the central bank’s ongoing efforts to manage liquidity in the banking system effectively.
The RBI will hold three additional OMO auctions of Rs 25,000 crore each on May 9, May 15, and May 19. These are intended to support surplus liquidity, which in turn helps in transmission of repo rate cuts better, an economist from a public sector bank said.
Since January 30, the RBI has infused Rs 3.24 lakh crore into the banking system through OMO purchases. This move followed a significant liquidity deficit, which had crossed Rs 3 lakh crore and peaked at Rs 3.15 lakh crore on January 11. The shortfall was largely due to the RBI’s aggressive foreign exchange interventions.
But liquidity conditions have since then become better, shifting to a surplus from April. The banking system showed a liquidity surplus of Rs 1.2 lakh crore on Monday and Rs 1.5 lakh crore on Friday. The RBI has used a combination of instruments to contain liquidity stress, such as a reduction in the cash reserve ratio (CRR), variable rate repo (VRR) auctions, long-term repo operations, forex swaps, and OMO purchases.
Durable liquidity will likely increase to more than Rs 3 lakh crore at the end of Q1 FY26 from about Rs 2 lakh crore at present, according to a report by Kotak Institutional Equities. The assumption is based on moderate currency in circulation leakage, the possibility of higher-than-anticipated RBI dividend, and additional OMO buys or forex swaps. But Kotak further noted that short-term banking system liquidity will continue to oscillate depending on the rate of government spending.
