RBI OMOs in Q4 FY26: Easing Bank Treasury Losses
Why in the news
Bond yields climbed in the January-March quarter of FY26, so the central bank stepped in with large purchases that eased pressure on bank treasury books.
About OMOs
Open Market Operations are the central bank’s buying and selling of government securities in the open market. They are used to inject or absorb liquidity, steady bond yields and influence interest rates.
Why treasury losses were rising
- Banks hold large amounts of G-Secs; when yields go up, prices fall and mark-to-market (MTM) losses arise.
- Yield drivers: West Asia escalation, higher crude, rise in US Treasury yields, rupee depreciation and foreign portfolio outflows.
How OMOs helped
| Effect | Explanation |
|---|---|
| Liquidity | Durable liquidity added to the banking system |
| Loss absorption | RBI took on part of MTM losses by buying at lower yields |
| Profit booking | Participating banks could book profits earlier |
| Yield stability | Disorderly yield spikes were avoided |
Exam angle
- MTM loss: fall in market value of securities below purchase price, which lowers treasury income and quarterly profit.
- OMO size in Q4 FY26: about ₹3.5 trillion.
- Inverse link: yields up, prices down.