Reserve Bank of India (RBI) Open Market Operation (OMO) Purchase

The Reserve Bank of India recently conducted its fifth OMO purchase for the year 2025, accepting ₹44,541 crore of bids against a notified amount of ₹50,000 crore. This auction round saw bids amounting to ₹67,540 crore.

System in Deficit

• This is the first OMO auction in the current liquidity-enhancement initiative where the RBI accepted bids lower than the notified amount.
• The central bank's goal is to inject durable liquidity into a banking system that has been in deficit since mid-December.
• The daily average liquidity deficit in March was ₹1.62 lakh crore.
• Economists anticipate an improvement in liquidity post-April, correlating with increased government spending at the start of the new fiscal year.
• Prior to this auction, the RBI injected ₹2 lakh crore via OMO auctions and $15 billion through foreign exchange swaps.

Highest Demand

• Rajeev Pawar, head of treasury at Ujjivan Small Finance Bank, noted that bank pricing might have exceeded RBI's comfort levels, leading to some bids not being accepted.
• The appetite for selling from the banks' held-to-maturity books appears satisfactory.
• The OMO auction included six securities with maturities between 2029 and 2037.
• The 7.26% GS 2033 security witnessed the highest demand.
• Pawar anticipates more OMO activities in the next fiscal year, with an assumption of a positive reception due to RBI measures and increased government expenditure.