RBI OMO Sale Auction: Rs 25,000 Crore Liquidity Drain
Why in the news
To absorb lasting surplus rupee funds from banks, the central bank offloaded ₹25,000 crore of government bonds.
Key facts
- OMO: a quantitative tool involving outright buying or selling of G-Secs and Treasury Bills on the secondary market to steer reserve money.
- Rates: repo 5.25%, SDF 5.00%; WACR is the operating target.
| Tranche date | Amount |
|---|---|
| 17 September | ₹50,000 crore |
| 21 September | ₹25,000 crore |
| 28 September | ₹25,000 crore |
Types of OMO
- Outright sale: permanently absorbs durable liquidity.
- Outright purchase: injects durable liquidity.
- Operation Twist: selling short-term and buying long-term papers together, to flatten the yield curve without growing the balance sheet.
How it works
- After notification, primary dealers, scheduled commercial banks and others bid electronically on e-Kuber.
- Bids are accepted up to cut-off yields, by multiple-price or uniform-price auction.
- Banks’ balances with RBI fall, locking reserve cash into interest-earning securities.
Exam angle
- e-Kuber is RBI’s core banking solution; DvP means Delivery versus Payment.
- VRRR is a transient tool; OMO sales, CRR, sell/buy swaps and MSS are durable ones.