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RBI to infuse Rs 12,500 crore into system through OMOs to increase liquidity

In order to increase liquidity into the market, the Reserve Bank of India (RBI) said it would inject Rs 12,500 crore into the system through purchase of government securities on February 21, 2019. The purchase will be made through open market operations (OMOs).

The central bank in its release said based on an assessment of prevailing liquidity conditions and also of the durable liquidity needs going forward, it has decided to conduct purchase of government securities under OMOs for an aggregate amount of Rs 125 billion on February 21, 2019.

The eligible participants should submit their offers in electronic format on the RBI core banking solution (E-Kuber) system on February 21. The result of the auction will be announced on the same day and payment to successful participants will be made on the following day. Recently, RBI had injected Rs 20,000 crore into the system through OMOs in January 2019.

OMOs are financial tools to either inject or suck out liquidity from the system. When the liquidity is tight, money is pumped into the market by purchase of government securities. While in the case of surplus, the excess money is sucked out by selling of government bonds.

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