The OMO (Open Market Operation) Auction:
The Reserve Bank of India (RBI) conducted an Open Market Operation (OMO) sale auction, offloading ₹25,000 crore worth of Government of India securities (G-Secs) to drain durable surplus rupee liquidity from the banking system.
- It is a quantitative monetary policy tool through which the central bank (RBI) conducts outright purchases or sales of Government Securities (G-Secs) and Treasury Bills in the open secondary market to regulate the quantum of liquidity (reserve money) in the banking system.
- Types of OMO Operations:
- Outright OMO Sale: The RBI sells G-Secs from its internal portfolio to commercial banks and primary dealers, permanently absorbing durable surplus rupee liquidity from the banking system.
- Outright OMO Purchase: The RBI buys G-Secs from market participants by injecting central bank money, providing durable reserve liquidity to address cash deficits.
- Simultaneous Sale & Purchase (Special OMO / Operation Twist): Simultaneous selling of short-term securities and buying of long-term government bonds to flatten the yield curve without expanding the central bank’s balance sheet.
- Aim: To manage systemic durable liquidity, anchor short-term interbank money market rates (such as the Weighted Average Call Rate – WACR) around the policy Repo rate, and curb demand-pull inflationary pressures stemming from excess money supply.
