RBI Absorbs ₹25,000 Crore Banking System Liquidity Through Second OMO Bond Sale Amid Surplus Funds
Mumbai, Sep 21: The Reserve Bank of India (RBI) on Monday accepted bids worth Rs 25,000 crore in the second tranche of its open market operation (OMO) sale of government securities, as it stepped up efforts to absorb surplus liquidity from the banking system. The RBI accepted Rs 11,512 crore of the 6.10 per cent GS 2031, Rs 8,758 crore of the 7.95 per cent GS 2032, Rs 2,300 crore of the 6.75 per…
On September 21, the Reserve Bank of India (RBI) purchased bonds worth Rs 25,000 crore in the second Open Market Operation (OMO) bond sale, aiming to reduce excess liquidity in the banking system. The central bank accepted bids for Rs 11,512 crore of 6.10% government securities 2031, Rs 8,758 crore of 7.95% securities 2032, Rs 2,300 crore of 6.75% securities 2029, Rs 2,250 crore of 7.17% securities 2030, and Rs 180 crore of 7.17% securities 2028.
However, the RBI declined to accept bids for the 8.28% securities 2027. As of September 20, the RBI estimated the banking system's liquidity surplus at Rs 6.05 lakh crore. In an OMO sale, banks and investors pay the RBI for government securities, which removes rupee liquidity from the banking system. The RBI had announced OMO sales amounting to Rs 1 lakh crore over three tranches to manage current liquidity conditions.
The remaining Rs 25,000 crore tranche is scheduled for September 28. The banking sector has been inundated with liquidity due to significant mobilisation of FCNR (B) deposits, leading to increased foreign currency in the system. Subsequent swaps with the RBI provided rupee liquidity to banks. Additionally, month-end government expenditures, such as salary and pension payments, contributed to liquidity in the banking system.
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