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Informist, Friday, Apr. 4, 2025

 

NEW DELHI – The Reserve Bank of India did not buy or sell gilts outside open market operation auctions in the week ended Mar. 28, data released Friday showed. During the week, it had bought INR 445.41 billion worth of gilts at an auction against a notified amount of INR 500 billion.

 

Since the first OMO auction on Jan. 30, the central bank went six weeks without any purchases or sales in the secondary market, before buying INR 100 million worth of gilts on screen in the week ended Mar. 21. The RBI had in January bought gilts amounting to INR 388.15 billion.

 

While it has mostly stayed away from on-screen purchases since Jan. 30, the central bank bought gilts amounting to INR 1.45 trillion in March through three OMO auctions, with its total auction purchases in Jan-Mar coming to INR 2.45 trillion.

 

The RBI on Tuesday unexpectedly announced another INR 800 billion worth of gilt buys through auctions in April. At the first of these scheduled auctions on Thursday, the RBI bought the entire notified amount of INR 200 billion through six bonds. Traders see RBI's focus on improving liquidity as a precursor to it cutting the repo rate by another 25 basis points at the next Monetary Policy Committee meeting starting Monday.

 

The central bank began infusing liquidity in the latter half of January after the liquidity deficit in the banking system shot up due to heavy dollar sales by the RBI in the foreign exchange market to prop up the rupee. This exacerbated the tightness following the advance tax payments in December. In addition to the OMOs, the central bank announced several measures to infuse durable liquidity, including daily and long-tenure variable rate repo auctions and dollar/rupee buy/sell swap auctions.

 

Following the RBI measures, the liquidity in the banking systems has moved to surplus at the end of March from the liquidity deficit prevailing since mid-December. Easier liquidity conditions improve the transmission of rate cuts.  End

 

Reported by Aaryan Khanna

Edited by Saji George Titus

 

 

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