The RBI fully accepted bids for its Rs 50,000 crore OMO sale of government securities. This move aims to absorb the durable surplus rupee liquidity in the financial system, which surged due to record inflows from FCNR(B) deposits.
RBI's Rs 50,000 Crore OMO Sale Fully Subscribed
The Reserve Bank of India (RBI) has accepted bids for the entire notified amount of Rs 50,000 crore in its Open Market Operation (OMO) sale of government securities, a major liquidity absorption exercise that comes against the backdrop of large foreign currency non-resident deposit inflows into the banking system.
The central bank had notified an aggregate amount of Rs 50,000 crore for the OMO sale across six Government of India securities, without specifying a security-wise amount. According to the auction results released by the RBI, the full Rs 50,000 crore in face value was accepted.
Significance Amid Record FCNR(B) Inflows
The OMO sale assumes significance amid the sharp increase in liquidity following record inflows under the RBI's special foreign currency mobilisation measures. Foreign Currency Non-Resident (Bank), or FCNR(B), deposits alone had mobilised USD 127.23 billion as of August 31, while total inflows including Overseas Foreign Currency Borrowings and External Commercial Borrowings stood at USD 136.38 billion.
How OMOs Absorb Liquidity
OMO sales are used by the central bank to absorb durable surplus rupee liquidity from the financial system. Under such operations, the RBI sells government securities from its portfolio, with funds paid by market participants moving out of the banking system.
Auction Highlights and Yields
Of the six securities sold on Thursday, the RBI accepted the highest amount of Rs 18,840 crore in the 8.28 per cent Government Security 2032, followed by Rs 12,645 crore in the 5.77 per cent Government Security 2030. The cut-off yields ranged from 6.6007 per cent to 7.0090 per cent, with the 8.28 per cent GS 2032 carrying the highest cut-off yield of 7.0090 per cent. (ANI)
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