RBI’s OMO Sees Strong Demand

Context:

• The Reserve Bank of India (RBI) received ₹70,144 crore worth of bids in its second Open Market Operation (OMO) for FY26, more than 3.5x the notified amount of ₹20,000 crore.
• Investors showed robust interest due to relatively attractive bond pricing, nearing market rates, despite being at a slight discount.

Bond-Wise Demand and Cutoff Insights

• 7.23% 2039 bond (longest maturity):
  • ₹6,401 crore accepted, the highest allocation in this round.
• 2034 bond:
  • Saw multiple bids at identical cutoffs, leading to partial allotment — only 38.2% of bids were accepted.
  • This indicates heightened competition among traders and institutions.

RBI’s Liquidity Management Strategy

• RBI has injected ₹6.6 lakh crore since December 2024 using:
  • Cash Reserve Ratio (CRR) cuts
  • OMO bond purchases
  • Dollar-rupee buy/sell swaps
• The April 2025 daily average liquidity is now in surplus mode (~₹1.7 lakh crore), reversing the January 2025 deficit (>₹3 lakh crore).

Forecast & Expected Measures

• Economists expect additional liquidity measures in H2 FY26:
  • IDFC First Bank: Predicts ₹3–₹4 lakh crore infusion in FY26.
  • Nomura: Anticipates fresh liquidity announcements as early as this week due to the RBI’s proactive approach.

TET