The Reserve Bank of India (RBI) on Tuesday received bids exceeding twice the notified amount in its open market operation (OMO) purchase from banks. The apex bank got bids worth more than Rs 1.32 lakh crore, against the notified amount of Rs 50,000 crore. The RBI will hold three more OMO auctions, each worth Rs 25,000 crore, on May 9, May 15, and May 19.
“The OMO auctions are aimed at maintaining surplus liquidity surplus which will help in better transmission of repo rate cuts by the RBI,” said an economist of a public sector bank.
The RBI has infused Rs 3.24 lakh crore into the banking system through OMO purchases Since January 30. The RBI has been injecting funds since mid-January to counter a sharp decline in liquidity, primarily driven by its aggressive interventions in the foreign exchange market. The deficit had breached the Rs 3 lakh-crore mark and touched Rs 3.15 lakh crore on January 11.
However, due to the various measures taken by the RBI, the banking system swung to surplus from April. The liquidity surplus was around Rs 1.2 lakh crore on Monday and Rs 1.5 lakh crore on Friday. The apex bank introduced various measures, including lowering the cash reserve ratio (CRR), daily variable rate repo (VRR) auction, long-term repo auction, forex swaps and OMO purchases, to ease liquidity stress.
“We estimate durable liquidity to improve to over Rs3 tn by the end of 1QFY26 from around Rs2 tn currently, led by tepid currency in circulation (CIC) leakage, RBI dividend (which could be higher than expectations of Rs2.1 lakh crore), and offsetting of short-forward book maturities with additional OMO purchases/ forex swaps,” said Kotak Institutional Equities in a report.
While durable liquidity is likely to be comfortable over the next few months, banking system liquidity may fluctuate depending on the scale and pace of government spending, it added.