The Reserve Bank of India (RBI) is likely to conduct open market operations (OMOs) around Rs 1.5-Rs 2 lakh crore by March 2026, said economists. Market participants are looking for clarity on the banking regulator’s liquidity management position in the upcoming policy, which is scheduled on December 5.
“The liquidity drain from FX intervention has undone the impact of CRR (cash reserve ratio) cuts. Looking ahead, currency leakage tends to pick-up from the festival season onwards till March-end. This will result in core liquidity surplus dipping below 1% of NDTL (net demand and time liabilities) in Q4FY26,” said Guara Sengupta, chief economist at IDFC FIRST Bank in a report.
The report added that they estimate that RBI will need to infuse at least Rs 2 lakh crore of durable liquidity by March 2026, to prevent core liquidity from dipping below 1% of NDTL. Sengupta expects such an announcement by December-end, as the need for infusion of liquidity could rise during that time.
What do experts say?
Madhavankutty G, chief economist at Canara Bank, also expects OMOs worth Rs 2 lakh crore in the fourth quarter. “RBI might intervene to defend rupee which could aggravate liquidity pressures,” he said. He added that widening credit and deposit growth can further create liquidity pressures, increasing the need for some measures.
The system liquidity averaged to Rs 1.78 lakh crore in November compared to Rs 3.04 lakh crore in July. The liquidity remained below 1% of NDTL most of the time since September-end on account of festive demand and the RBI’s FX intervention.
RBI Governor Sanjay Malhotra had earlier stated that they are looking at a comfortable level of 1% of NDTL. The RBI has already resumed bond purchases in the second market to support liquidity.
What do HBSC economists say?
HSBC sees room for Rs 1.5 lakh crore of OMOs in January-March. “If bond market transmission is an issue, that needs another instrument, for instance OMO purchases, to address the demand-supply trade mismatch,” HSBC economists said in a report.
Market participants expect that any signalling or liquidity announcements will boost the sentiment. Even if the RBI does not cut the repo rate, announcement of OMOs will help bond yields to soften a bit, they said. Currently, 10-year bond yield is trading at 6.52%.