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Informist, Friday, Jul. 4, 2025

--RBI did not buy or sell any gilts via OMO in week ended Jun 27

MUMBAI – The Reserve Bank of India abstained from gilt purchases in the secondary market in the week to Jun. 27, after purchasing gilts worth INR 100 million on-screen in the previous week, central bank data showed Friday. While traders did not expect Friday's data to show an on-screen open market purchase, they were closely tracking the figures after the central bank's surprise purchase in the week to Jun. 20, bond dealers said.

Earlier in the week, traders speculated that purchases by the 'Others' category in the gilt market, which comprises insurance companies, provident funds and the RBI, were on-screen buying of bonds by the RBI. Clearing Corp. of India data for the week ended Jun. 27 showed the 'Others' category bought INR 20.0 billion worth of gilts in the secondary market.

Market participants were confused about the recent on-screen purchase after the RBI stopped its open market purchase of gilts through auctions in May. Before the INR 100-million buys on week to Jun. 20, the central bank last bought gilts of the same quantum on-screen in the week to Mar. 21. The RBI's activity in the secondary market has been sporadic and minuscule since the end of January, after which it ramped up its buys through auctions. The central bank has also abstained from OMO auctions since May 19, after purchasing gilts worth over INR 5.2 trillion since January.

On the other hand, the central bank has conducted two variable rate reverse repo auctions on Jun. 27 and Friday, each for INR 1 trillion. At the first auction since November held last week, the RBI accepted bids worth INR 849.75 billion at a cut-off of 5.49%. At Friday's auction, the central bank accepted bids worth INR 1.00 trillion but received bids worth INR 1.71 trillion, which sparked speculation that another VRRR could be announced during the day itself.

Traders had expected the size of Friday's VRRR auction to be INR 1.5 trillion to INR 2 trillion, as RBI Governor Sanjay Malhotra had in April said that the central bank aimed to keep the liquidity surplus at around 1% of banks' net demand and time liabilities, which is INR 2.31 trillion as per latest data. The INR 1 trillion auction was just a rollover of last week's auction and is expected to continue every week in the near term, according to market participants. The RBI net absorbed INR 4.04 trillion from the banking system on Thursday, the highest since May 19, 2022, the central bank data showed. End

Reported by Cassandra Carvalho

Edited by Saji George Titus

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