RBI OMO Bond Purchase Gets 2.6x Bids: What Are OMOs?
Why in the news
RBI ran an open market operation on a Tuesday in May 2025 to buy government bonds. Bids far exceeded the amount sought.
Key facts
- Amounts: ₹50,000 crore invited; ₹1.32 lakh crore bid.
- Pricing: mostly at a premium; the 2031 paper at a discount.
- Top pick: 7.10% GS 2034, sold by investors to switch into the new 10-year benchmark issued on 2 May.
OMOs and their effect
| Action | When | Effect |
|---|---|---|
| Sell G-Secs | Surplus liquidity | Absorbs cash |
| Buy G-Secs | Liquidity shortage | Injects cash |
Why OMOs matter
- Manage liquidity and steady bond yields, which lowers government borrowing cost.
- Help control inflation and keep liquidity stable through the year.
Exam angle
- Buying bonds injects liquidity; selling absorbs it.