SBI, Bank of Baroda bid in most OMOs since January, received major liquidity support

liquidity

Two largest state-owned banks - State Bank of India and Bank of Baroda - have participated in most auctions of the Open Market Operation (OMO) purchases conducted by the Reserve Bank of India (RBI), receiving a major chunk of their required liquidity, bank officials have said.

State Bank of India, Chairman, CS Setty during the post earnings conference said that the lender has received major chunk of their liquidity from the OMO auctions. On the other hand, Bank of Baroda's Managing Director and Chief Executive Officer Debadatta Chand said the lender has participated in all the OMO auctions and will do so going ahead as well.

Another state-owned bank, Canara Bank, also told Moneycontrol that they have participated in the OMO auctions.

The central bank had started the OMO in January this year, in order to infuse durable liquidity into a banking system that was reeling under a squeeze. RBI said it had infused Rs 4.15 lakh crore through 12 OMO purchase auctions in the banking system, starting January 30 till May 6.

Later this month, the RBI is scheduled to conduct three OMO auction worth Rs 25,000 crore each on May 9, May 15, and May 19, to add significant liquidity into the banking system. On top of this, there is also the expectation of more than Rs 3 lakh crore as dividend transfer by the RBI to the Centre.

All this infusion along with daily variable rate repo auctions has helped the system liquidity to turn positive, and currently, liquidity within the banking system is estimated to be in surplus of around Rs 1.43 lakh crore.

The banking system liquidity had started falling into a deficit after a heavy tax outflow last year, along with slower government spending, RBI's interventions in the foreign exchange market and heavy selling by foreign portfolio investors in Indian equities.

To support liquidity in the banking system, the RBI has since late-2024 started infusing liquidity by tapping a combination of VRR or variable rate repo auctions, swaps and OMOs.