RBI announces Rs 60,000 crore OMO, other steps to inject liquidity into system

The regulator also said it will take measures 'as appropriate' to ensure orderly liquidity conditions in the banking system.

Regulator Reserve Bank of India has announced a series of measures on January 27 to inject liquidity in the banking system, including a Rs 60,000 crore OMO purchase in three tranches, and a Variable Rate Repo (VRR) auction next month.

The OMO purchase will be undertaken in three tranches of Rs 20,000 crore each, wherein RBI will buy government securities from the open market, injecting money into the economy to influence interest rates and manage liquidity. The OMO auctions will take place on January 30, February 13, and February 20.

The separate release of the central bank said that it will purchase 7.59% GS 2029, 7.18% GS 2033, 7.10% GS 2034, 6.79% GS 2034, and 7.18% GS 2037, securities worth Rs 20,000 crore on January 30.

The auction will take place between 10:30 am and 11:30 am on January 30, 2025. The auction will be multi-security auction using the multiple price method, release said.

The regulator will also conduct a USD/INR buy/sell swap auction of $5 billion for a tenor of six months, on January 31.

A 56-day Variable Rate Repo (VRR) auction for Rs 50,000 crore will also be held on February 7, 2025, said RBI. The RBI has already conducted six VRR auctions this month to help cash-strapped lenders.

Prior to these liquidity measures, the central bank has announced daily VRR auctions on January 15 after a review of liquidity. All VRR auctions are to be conducted on working days in Mumbai and reversal the next day.

These liquidity announcements came when the systemic liquidity is in huge deficit of around Rs 3.13 lakh crore.

The banking system is feeling the burden of costly deposits at a time Trump's tariff threat and FPI selling dollars from Indian equity markets has squeezed liquidity. Liquidity in the banking system stood at a deficit of Rs 2.09 lakh rupees as of January 14, showed the data from the Reserve Bank of India.

The immediate reason for the rapid fall in interbank liquidity and overall system or durable liquidity is the huge intervention by the Reserve Bank to soften the fall of the rupee-dollar exchange rate as foreign funds aggressively sell equities and buy dollars to repatriate back to their home country. Read more here.

The regulator also said it will take measures 'as appropriate' to ensure orderly liquidity conditions in the banking system. The measures come just days before the next meeting of the Reserve Bank of India's Monetary Policy Committee (MPC) is scheduled, on February 5.

Earlier in January, a report by Nomura's Asia Insights had made a case for more variable rate auctions (VRRs), buy/sell swaps and open market operations (OMO) purchases to address the tightening rupee (INR) liquidity.