Banks want RBI to inject Rs 3-5 lakh crore via OMO

Mumbai: Economists at Indian lenders urged the central bank to assure the markets it would conduct open market operation (OMO) purchases of at least ₹3-5 lakh crore to help cool yields and quicken the transmission of policy rate cuts, as liquidity deficit threatens to crimp credit demand and growth in Asia's No. 2 economy.

At a pre-policy consultation meeting, economists raised the topic of communicating the central bank's determination to boost the availability of funds, as tight system liquidity, strong credit growth, and sustained foreign exchange market intervention by the Reserve Bank of India (RBI) have largely offset the liquidity impact of past OMO actions, said an economist who attended one of the meetings.

The discussions took place during the meetings held on January 21 and 22, and were attended by governor Sanjay Malhotra, deputy governor Poonam Gupta, and Indranil Bhattacharyya, executive director in charge of the monetary policy department.


Participants also flagged concerns over the uncertainty surrounding the new inflation and GDP series, as well as elevated certificate of deposit (CD) rates amid tight liquidity, said an economist.

One participant, the economist added, suggested the RBI consider easing the intensity of its foreign exchange market intervention to reduce liquidity leakage.

"However, there was consensus that there should not be a rate cut in February and that the RBI should wait for the new CPI and GDP series data to kick in," said another economist, who attended the meetings.

With the new series expected to come into effect with the release of inflation data in February, economists do not expect the RBI to revise its inflation or growth forecasts in the February MPC. With the new series, the base year for calculating GDP will update to 2022-23 instead of 2010-11, while the base year for inflation would be updated to 2024.

System liquidity stood at a daily average surplus of ₹59,356 crore in January so far. The RBI also conducted OMO purchases for ₹3 lakh crore in December and January. The central bank has conducted OMOs of ₹5.20 lakh crore in the fiscal year so far.

The monetary policy committee is scheduled to announce its decision on the benchmark repo rate on February 6, following the presentation of the Union Budget by the finance minister on February 1. The RBI has cumulatively cut repo rate by 125 basis points to 5.25% since February 2025.

Strong Buying Interest
Market participants offered nearly double the amount in the latest tranche of open market operation (OMO) purchases for the current schedule by the central bank.

Participants offered ₹98,568 crore for a notified amount of ₹50,000 crore in the OMO purchase held on Thursday.

"Participants would have wanted to book profits for the last quarter in this OMO," said a treasury head at a private bank. The 6.67% government securities 2035 paper saw the most demand, with participants offering ₹34,874 crore, of which the RBI accepted ₹19,960 crore.

With no further open market operation purchases currently scheduled, market participants expect the Reserve Bank of India to announce additional OMOs at the monetary policy meeting on February 6, treasury heads said.