This move follows a period of liquidity strain caused by the central bank’s foreign-exchange interventions and seasonal currency leakage, economists said.
The RBI announced OMO purchases of ₹1 lakh crore in two tranches of ₹50,000 crore each on December 11 and 18. The forex swap for $5 billion will have a tenure of three years, and the first leg of the transaction will take place on December 16.
These moves should inject ₹1.45 lakh crore into the banking system. Average system liquidity stood at ₹1.68 lakh crore in November and ₹2.63 lakh crore in December so far, RBI data showed.
“Liquidity stood at about 0.8% of NDTL in November. The timing of this recent liquidity infusion is smart as we will also be having the quarterly advance tax outflows during the third week of December,” said Gaura Sengupta, chief economist at IDFC First Bank.
In the first tranche, the RBI will buy back seven papers maturing from 2029 to 2050.
“These measures will ensure adequate, durable liquidity in the system and further facilitate monetary transmission,” RBI Governor Sanjay Malhotra said.However, he clarified that the injection of liquidity through the purchase of government securities under OMOs and through operations under the LAF (VRR or VRRR) of short duration serve different purposes. The governor also clarified that OMOs are done to infuse liquidity and not influence yields. “The primary purpose of OMOs is to provide sufficient liquidity and not to directly influence G-sec yields,” he said.
“It seems like the RBI is frontloading rate cuts via OMOs. Announcing OMO also suggests that the RBI is cognizant of G-sec yields,” said Anitha Rangan, chief economist at RBL Bank.
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