Reserve Bank of India has advanced its scheduled Open Market Operation (OMO) purchases. The central bank will now infuse ₹1 lakh crore into the system by buying government securities, aiming to stabilise liquidity conditions and calm bearish bond market sentiment.
Why in News?
The RBI has advanced the timing of its OMO purchase auctions of Government Securities. The move comes after banking system liquidity surplus fell sharply below normal levels and benchmark bond yields surged to an 11-month high.
What Are OMO Purchases?
- Open Market Operations are tools used by the RBI to manage liquidity. When the RBI buys government securities, it injects money into the banking system, increasing liquidity and lowering borrowing costs.
- In the current scenario, liquidity surplus stood at only ₹56,987 crore on 26 January, far below the comfortable range of ₹1.50–2.00 lakh crore.
- uch tight liquidity can push interest rates higher, making credit costlier for businesses and the government.
- By advancing OMO purchases, the RBI is attempting to restore balance and prevent financial tightening.
Revised OMO Schedule: What Has Changed?
- Earlier, the RBI planned OMO purchase auctions on 5 February and 12 February 2026.
- These have now been preponed.
- The central bank will conduct two tranches of ₹50,000 crore each on 29 January 2026 and 5 February 2026.
- Advancing the auctions indicates urgency, suggesting that waiting longer could have worsened liquidity stress and further pushed up bond yields in the market.
Bond Yield Spike
- The yield on the benchmark 10-year G-Sec (6.48% GS 2035) jumped 6 basis points to close at 6.72%, the highest level in 11 months.
- Bond prices and yields move inversely, and this spike caused the bond price to fall by about 42 paise.
- Rising yields increase borrowing costs for the government and influence interest rates across the economy, including loans and mortgages.
- This sharp movement triggered RBI’s proactive response.
Why Are Yields Staying High Despite Rate Cuts?
- According to Nuvama Wealth, the elevated yields persist even though the RBI has cut the repo rate by 125 basis points since February 2025, bringing it down to 5.25%.
- Several external and domestic factors are responsible.
- These include a weak rupee, uncertainty surrounding the India–US trade deal, and Bloomberg Index Services delaying the inclusion of India’s fully accessible route bonds in its Global Aggregate Index.
- These factors have dampened foreign investor sentiment in Indian bonds.
Liquidity Pressures in FY26
- Throughout FY26, banking system liquidity has remained volatile. Factors such as rupee depreciation, advance tax payments, and regular GST outflows have repeatedly drained liquidity.
- Additionally, this week saw an overhang of bond supply, including government securities and State Development Loans (SDLs).
- Heavy supply without adequate demand has kept bond market sentiment bearish, further pushing yields upward.
Key Summary at a Glance
| Aspect | Details |
| Why in News? | RBI advanced OMO purchases to ease liquidity stress |
| Liquidity Surplus | ₹56,987 crore (below comfort level) |
| OMO Amount | ₹1 lakh crore |
| Revised Dates | 29 Jan & 5 Feb 2026 |
| 10-Year G-Sec Yield | 6.72% (11-month high) |
| Repo Rate | 5.25% after 125 bps cut |
Question
Q. What is the total amount of liquidity RBI plans to infuse through OMO purchases?
A. ₹50,000 crore
B. ₹75,000 crore
C. ₹1 lakh crore
D. ₹1.5 lakh crore