RBI OMO Purchases Likely to Rise Amid Liquidity Deficit
Why in the news
Persistent tight liquidity has led bond traders to expect the RBI to widen its Open Market Operation (OMO) purchases.
Key facts
- The system has been in liquidity deficit since 16 December 2024.
- Core liquidity deficit: ₹40,000 crore on 7 February; overall banking deficit ₹2.07 trillion by Wednesday.
- Three OMO auctions done so far; more announcements are expected beyond the next one.
- RBI used the infused liquidity for forex intervention, selling an estimated $12-14 billion that week; the rupee closed at 86.92 versus 86.89 a day earlier.
Latest OMO auction
| Item | Detail |
|---|---|
| Securities bought | ₹40,000 crore |
| Bids received | ₹1.8 trillion (4.5 times notified amount) |
| Top bidders | State-owned banks |
Exam angle
- OMO: central bank buys securities to inject liquidity, as done here.
- Deficit: ₹2.07 trillion overall.