RBI OMO Purchase of ₹50,000 Crore G-Secs Eases Liquidity
Why in the news
With global uncertainty and higher oil prices in the backdrop, the Reserve Bank of India bought ₹50,000 crore of G-Secs from the market to add cash to the system.
Key facts
- Tool used: Open Market Operations (OMO).
- Amount: ₹50,000 crore of Government Securities.
- Direction: purchase, which raises banking system liquidity.
- Backdrop: global economic uncertainty and rising oil prices.
OMO: purchase versus sale
| Action | RBI does | Result |
|---|---|---|
| OMO purchase | Buys government securities | Liquidity in banks rises |
| OMO sale | Sells government securities | Surplus liquidity is soaked up |
Why RBI did it
- To inject liquidity into the system.
- To keep bond yields and markets steady.
- To offset strain from advance tax payments, GST outflows and forex interventions.
Exam angle
- OMO is a monetary policy tool to regulate liquidity.
- Buying securities = more money in the system.
- Instrument traded: G-Secs.