RBI sells ₹25,000 crore of G-secs in OMO to mop up surplus banking liquidity

The Reserve Bank of India (RBI) accepted bids worth ₹25,000 crore in the second tranche of its open market operation (OMO) sale of government securities on Monday, as it continued efforts to absorb excess liquidity from the banking system.Total bids amounted to ₹84,982 crore, indicating that investor demand for the issue was significantly higher than the notified amount.The central bank accepted ₹11,512 crore of the 6.10% Government Security (GS) 2031, ₹8,758 crore of the 7.95% GS 2032, ₹2,300 crore of the 6.75% GS 2029, ₹2,250 crore of the 7.17% GS 2030 and ₹180 crore of the 7.17% GS 2028, according to the RBI’s auction results.The RBI did not accept any bids for the 8.28% GS 2027.The latest sale comes as the banking system continues to hold a large cash surplus. Liquidity was estimated at around ₹6.05 lakh crore as of September 20, according to RBI data.In simple terms, an OMO sale allows the RBI to take excess cash out of the banking system by selling government bonds to banks and other investors. This helps prevent surplus money from pushing short-term interest rates too low and gives the central bank greater control over liquidity.The RBI had announced OMO sales worth a total of ₹1 lakh crore in three tranches — ₹50,000 crore on September 17, followed by ₹25,000 crore each on September 21 and September 28.The latest auction follows the first ₹50,000-crore OMO sale last week. The RBI is using the bond sales alongside other liquidity-management tools as it seeks to bring excess cash in the banking system under control.A key source of the surplus has been the strong mobilisation of Foreign Currency Non-Resident (Bank), or FCNR(B), deposits. The inflow of foreign currency, followed by swaps with the RBI, has effectively released additional rupee liquidity into the banking system.Month-end government spending, including salary and pension payments, has also added to the surplus cash available with banks.The RBI’s final ₹25,000-crore OMO tranche is scheduled for September 28.(With Agency Inputs)

Source link