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Updated 21:02 IST, January 27th 2025

Liquidity Boost: RBI Announces Rs 60,000 Crore OMO - Details

The RBI's strategy includes purchasing government bonds worth Rs 600 bn in three tranches and conducting a 56-day variable rate repo auction of Rs 500 bill.

Reported by: Business Desk
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The Reserve Bank of India ( RBI ), on 27th January 2025, has announced a series of measures aimed at injecting liquidity into the banking system to address the ongoing cash shortages that have increased short-term borrowing rates. These initiatives are anticipated to collectively infuse approximately Rs 1.5 trillion (about $17.39 billion) into the financial system. 

The RBI's strategy includes purchasing government bonds worth Rs 600 billion in three tranches and conducting a 56-day variable rate repo auction of Rs 500 billion scheduled for February 7. Additionally, a USD/INR swap auction of $5 billion with a six-month maturity is planned for January 31. 

"On a review of current liquidity and financial conditions, the Reserve Bank has decided to conduct the following operations to inject liquidity into the banking system:
1) Open Market Operations (OMO) purchase auctions of Government of India securities for an aggregate amount of Rs 60,000 crore in three tranches of Rs 20,000 crore each to be held on January 30, 2025, February 13, 2025, and February 20, 2025

2) 56-day Variable Rate Repo (VRR) auction for a notified amount of Rs 50,000 crore to be held on February 7, 2025

3) USD/INR Buy/Sell Swap auction of USD 5 billion for a tenor of six months to be held on January 31, 2025," RBI said in its Circular. 

Analysts and traders interpret these measures as potential precursors to a rate cut in the upcoming monetary policy review on February 7, following the federal budget presentation on February 1. This trend suggests the central bank's focus on facilitating liquidity and reducing market rates, possibly indicating a shift towards supporting economic growth amid projections of a slowdown to a four-year low in 2024-25. 

RBI also stated that detailed instructions for each operation shall be issued separately. " The Reserve Bank will continue to monitor evolving liquidity and market conditions and take measures as appropriate to ensure orderly liquidity conditions," the circular further added. 
 

Published 19:45 IST, January 27th 2025