RBI to double bond purchases to Rs 40,000 crore this week to ease liquidity crunch

The Reserve Bank of India (RBI) on Monday announced that it will increase its government securities purchase to Rs 40,000 crore under the upcoming open market operation (OMO) scheduled for February 13. 

The move aims to address the persistent liquidity deficit in the banking system, which has remained in shortfall for eight consecutive weeks, reaching Rs 1.33 lakh crore as of February 7.  

Eligible participants must submit their bids electronically through RBI’s E-Kuber system between 10:30 am and 11:30 am on February 13, 2025. In case of technical issues, physical bids will be accepted at the Financial Markets Operation Department, with further details available on the RBI website.

The auction results will be declared the same day, and successful bidders must ensure securities are available in their SGL (Subsidiary General Ledger) account by 12 noon on February 14, 2025.  

Initially, the RBI had planned to purchase Rs 20,000 crore worth of bonds but later increased the amount to Rs 40,000 crore to support market liquidity.  

The announcement follows the RBI’s recent 25 basis point rate cut aimed at stimulating economic growth. However, the central bank did not introduce additional liquidity measures at the time, leading to a rise in bond yields. RBI Governor Sanjay Malhotra assured that the central bank remains vigilant and will take necessary actions to maintain stable liquidity conditions.  

So far, the RBI has injected over Rs 1 lakh crore into the financial system through bond purchases and dollar/rupee swaps, in addition to Rs 50,000 crore via a 56-day repo auction.  

This OMO is part of the RBI’s broader liquidity strategy announced last month, under which it planned to infuse Rs 60,000 crore in three tranches of Rs 20,000 crore each. 

The first auction took place on January 30, while the upcoming February 13 auction will see an increased quantum of Rs 40,000 crore, covering five government securities. The third tranche, amounting to Rs 20,000 crore, is scheduled for February 20.  

The RBI confirmed that apart from the revised purchase amount, other details of the February 13 auction remain unchanged.