RBI OMO Purchase of ₹80,000 Crore to Add Liquidity
Why in the news
RBI decided to buy government bonds worth ₹80,000 crore to pump money into banks so that policy rate cuts pass through to borrowers, just before the April Monetary Policy Committee meeting.
Key facts
- Instrument: open market operation (OMO) purchase of government securities.
- Schedule: four tranches of ₹20,000 crore on April 3, 8, 22 and 29.
- MPC meeting: April 7-9; a second straight 25 bps repo cut was expected.
- Last repo cut: 25 bps in February, after 11 meetings with rates unchanged.
- Target: liquidity surplus of ₹1-2 trillion.
| Liquidity measure | Value |
|---|---|
| Net liquidity surplus (Sunday) | ₹89,398 crore |
| Core liquidity surplus (March 21) | ₹1.1 trillion |
| Injected since January 2024 (OMOs, swaps, repos) | Over ₹5 trillion |
| Repos maturing in early April | ₹1.8 trillion |
Background
- Liquidity turned surplus for the first time in four months, helped by heavy government spending near the financial year-end.
- Surplus liquidity speeds up monetary transmission to lower borrowing costs.
Concerns
- EBLR-linked loans have fallen, but MCLR (which affects corporate loans) has barely moved.
- Banks had not cut deposit rates because liquidity had earlier been tight.
- Economists read the OMO as a signal of continued easing, with a dovish tilt expected.
Exam angle
- OMO means buying or selling government securities to manage liquidity.
- EBLR is tied to the repo rate; MCLR is a cost-of-funds benchmark.
- Know the tranche size and the dates.