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Informist, Friday, May 2, 2025

--RBI did not buy or sell any gilts outside OMO auction in week ended Apr 25 

MUMBAI – The Reserve Bank of India did not buy or sell gilts in the secondary market in the week ended Apr. 25, central bank data released Friday showed. The data showed the RBI had bought INR 400 billion of gilts through auction under its open market operations, settled on Apr. 21, and INR 200 billion of gilts, settled on Apr. 23.

The central bank last bought gilts in the secondary market in the week ended Mar. 21, when it net bought gilts worth INR 100 million. The RBI, which bought gilts amounting to INR 388.15 billion in the secondary market, has mostly stayed away from on-screen purchases since then. So far in 2025, the central bank has bought gilts amounting to INR 3.65 trillion through several OMO auctions.

The RBI has bought INR 1.2 trillion through five auctions in April. The central bank has also announced the purchase of gilts worth INR 1.25 trillion through four auctions in May. The first tranche of the four auctions is scheduled for Tuesday. The RBI has offered to buy the 7.06%, 2028 bond, the 6.10%, 2031 bond, the 8.32%, 2032 bond, the 7.18%, 2033 bond, the 7.10%, 2034 bond, the 7.40%, 2035 bond, and the 7.23%, 2039 bond at the auction.

At the post-policy press conference on Apr. 9, RBI Governor Sanjay Malhotra had said that the central bank aimed to ensure proper transmission of the repo rate to the banking system and economy, and it would ensure a sufficient liquidity surplus in the banking system. In the April policy, the Monetary Policy Committee cut the repo rate by 25 basis points to 6.00% and changed its stance to 'accommodative' from 'neutral'.

The central bank began infusing liquidity in December after the liquidity deficit in the banking system shot up due to heavy dollar sales by the RBI in the foreign exchange market to support the rupee. This exacerbated the tightness in liquidity following the advance tax payments in December. In addition to the OMO, the central bank announced several measures to infuse durable liquidity, including a cut in the cash reserve ratio, daily and long-tenure variable rate repo auctions and dollar/rupee buy/sell swap auctions. Since Mar. 29, systemic liquidity has been in a surplus. On Thursday, the net liquidity absorbed by the central bank, a proxy for the systemic liquidity surplus, was INR 1.25 trillion.  End

Reported by Vidhushi RajPurohit

Edited by Saji George Titus

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