RBI net bought INR 77.90-bln gilts outside OMO auction in week ended Jan 31
This story was originally published at 18:02 IST on 7 February 2025
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--RBI bought INR 77.90 bln gilts outside OMO auction wk to Jan 31
MUMBAI – The Reserve Bank of India bought gilts worth INR 77.90 billion outside open market operation auctions in the week ended Jan. 31. This was the third straight week of significant central bank purchases via on-screen secondary market operations.
In the week ended Jan. 24, the RBI bought 208.50 billion of gilts outside auction, the largest such buy since the week ended Feb. 12, 2021. The central bank has infusing liquidity in the latter half of January after liquidity deficit in the banking system shot up. There was a significant drain of systemic liquidity over the last two months due to advance tax payment, capital outflows and RBI's intervention in the foreign exchange market, and an increase in the currency in circulation, RBI Governor Sanjay Malhotra said Friday. The durable liquidity slipped into deficit in January for the first time in over five years.
The RBI did not announce any additional liquidity easing measures after the Monetary Policy Committee meeting on Friday. Some market participants were of the view that the RBI might announce an OMO auction calendar. The rate-setting panel on Friday unanimously decided to cut the policy repo rate by 25 basis points to 6.25%, the first cut in five years. On the liquidity front, Malhotra said that the central bank will be "watchful and remain nimble in providing the required amount of liquidity".
On Jan. 27, the central bank brought structured measures to infuse durable liquidity, in addition to secondary market buys. The RBI announced purchases of government bonds worth INR 600 billion via open market operations in three tranches, a six-month dollar/rupee buy/sell swap auction for $5 billion, and a 56-day variable rate repo auction for INR 500 billion.
In the first tranche of the OMO auctions, the central bank bought INR 200.20 billion worth of four gilts on Jan. 30. The RBI also accepted bids worth $5.10 billion at the dollar/rupee buy/sell swap auction on Jan 31.
To cool overnight rates amid tight liquidity, the central bank has also been conducting daily variable rate repo auctions since Jan. 16. The central bank's liquidity support has coincided with RBI Deputy Governor Rajeshwar Rao taking over the Monetary Policy Department from former deputy governor Michael Debabrata Patra. Latest data showed RBI bought gilts in the secondary market on Jan. 27 and Jan. 28, with no other on-screen activity around the auction on Jan. 30.
Bond market traders have been keenly tracking Clearing Corp. of India Ltd. data for clues on the RBI's buys in the secondary market. For the week ended Jan. 31, 'Others' – a segment that comprises insurance companies, provident funds and the central bank – bought gilts worth INR 61.46 billion in the secondary market, down from INR 186.97 billion in the previous week.
In a meeting with RBI officials on Jan. 9, treasury officials from banks and primary dealers asked the central bank to infuse durable liquidity into the banking system. The methods suggested included open market bond purchase operations, as well as a cash reserve ratio cut or long-term dollar-rupee buy-sell swaps. End
Reported by Vidhushi RajPurohit
Edited by Saji George Titus
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