RBI Receives Double the Bids for ₹50,000-Crore OMO

The Reserve Bank of India received bids worth over ₹1.01 lakh crore in its open market operation (OMO) purchase, more than twice the notified amount of ₹50,000 crore. This move will help inject liquidity into the banking system, especially ahead of advance tax and GST payments, which are expected to drain funds.

Liquidity Challenges Amid Tax and GST Payments

Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank, noted that advance tax and GST outflows in the coming weeks would further strain liquidity. However, she expects overnight rates to remain stable due to RBI’s liquidity measures.

Liquidity Deficit and RBI’s Interventions

The banking system saw some relief in early March due to the RBI’s $10-billion forex swap auction on February 28, which injected nearly ₹85,000 crore. However, liquidity tightened again, with the deficit rising to ₹2.42 lakh crore on March 17.

Since mid-January, the RBI has been injecting funds to counter falling liquidity, mainly caused by its forex market interventions. The deficit had peaked at ₹3.15 lakh crore on January 11 but later reduced to ₹1.5-2 lakh crore in February after RBI’s measures.

RBI’s Steps to Ease Liquidity Stress

The RBI has taken several steps to address liquidity shortages, including:

• CRR Cut: In December, the RBI reduced the Cash Reserve Ratio (CRR) by 50 basis points, releasing ₹1.16 lakh crore.
• OMO Purchases: The RBI conducted ₹1 lakh crore in OMO purchases.
• Repo Auctions: Daily variable rate repo (VRR) auctions and long-term repo auctions were introduced.
• Forex Swaps: A dollar-rupee buy/sell swap was executed.
• 56-Day VRR Auction: Another auction was conducted to manage liquidity.

Conclusion

The RBI’s efforts to manage liquidity through OMO purchases, forex swaps, and repo auctions indicate a strategic push to maintain financial stability. With further tax and GST outflows ahead, these measures are expected to ease the liquidity crunch and potentially create a surplus in the banking system.

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