The Reserve Bank of India (RBI) has announced that it will conduct an Open Market Operation (OMO) on April 17 to purchase government securities worth ₹40,000 crore. This is being done to ensure there is enough liquidity — or money flow — in the banking system. This fresh move comes in addition to an earlier ₹80,000 crore OMO programme already scheduled in four phases of ₹20,000 crore each on April 3, 8, 22, and 29.
Along with this, the RBI will also hold a long-term repo auction on April 17, where it will provide ₹1.5 lakh crore to banks for 43 days. In such repo operations, banks borrow money from the RBI by pledging government securities, and this too helps in maintaining liquidity. So far, the RBI has already injected ₹2.9 lakh crore into the system through OMOs and another ₹2 lakh crore through similar long-term repo operations.
A treasury head at a private bank mentioned that RBI is fulfilling its commitment to maintain surplus liquidity so that interest rate cuts (announced in monetary policies) can effectively reach borrowers. According to the RBI, the banking system had a liquidity surplus of ₹1.8 lakh crore as of Thursday.
This increase in liquidity is being viewed as a positive sign for the bond market. Since global bond yields, especially in the US, have been unstable, the RBI is making sure that India’s domestic bond yields remain steady and low. A bond market dealer from a public sector bank stated that by the end of June, the yield on India’s benchmark 10-year government bond might fall to around 6.25%. Currently, it is at a three-year low, settling at 6.44% after the recent RBI policy meeting.
