The Reserve Bank of India (RBI) has accepted bids for the entire ₹50,000 crore offered through its latest Open Market Operation (OMO) sale of government securities. The liquidity absorption exercise comes as the banking system sees a significant increase in funds following strong inflows through foreign currency non-resident deposit schemes.
The central bank had announced a total OMO sale of ₹50,000 crore covering six Government of India securities. No separate amount was fixed for individual securities. According to the auction results released by the RBI, the entire notified amount of ₹50,000 crore in face value was accepted.
OMO Sale Comes Amid Strong FCNR(B) Inflows
The latest OMO operation gains importance against the backdrop of a sharp rise in banking-system liquidity following the RBI’s special measures to attract foreign currency funds.
As of August 31, Foreign Currency Non-Resident (Bank), or FCNR(B), deposits had mobilised USD 127.23 billion. When Overseas Foreign Currency Borrowings and External Commercial Borrowings are also included, total inflows stood at USD 136.38 billion.
How RBI Uses OMO Sales to Manage Liquidity
Open Market Operations are one of the tools used by the RBI to manage durable liquidity in the financial system.
During an OMO sale, the central bank sells government securities from its portfolio to market participants. The money paid for these securities moves out of the banking system, thereby absorbing surplus rupee liquidity.
Key Securities and Auction Yields
The RBI conducted the sale across six government securities on Thursday. The largest amount accepted was ₹18,840 crore for the 8.28 per cent Government Security 2032.
The second-highest amount, ₹12,645 crore, was accepted for the 5.77 per cent Government Security 2030.
The cut-off yields across the six securities ranged between 6.6007 per cent and 7.0090 per cent. The 8.28 per cent Government Security 2032 recorded the highest cut-off yield at 7.0090 per cent.