RBI conducts G-Secs purchase of ₹50,000 crore to inject liquidity, another tranche on Friday
The Reserve Bank of India (RBI) conducted an Open Market Operation (OMO) purchase of Government Securities (G-Secs) worth ₹50,000 crore on 9 March 2026 to inject durable liquidity into the banking system.
This is the first tranche of a total ₹1,00,000 crore OMO purchase plan; the second tranche of ₹50,000 crore is scheduled for 13 March 2026.
The securities purchased span a range of maturities: 6.33% G-Sec (2035) — ₹13,507 crore; 6.01% bonds (2030) — ₹13,494 crore; 6.10% bonds (2031) — ₹8,157 crore; 7.30% bonds (2053) — ₹6,955 crore; and others.
Since the beginning of 2026, the RBI has cumulatively injected approximately ₹2.50 lakh crore via OMO purchases, signalling a sustained accommodative posture on liquidity.
The move aims to pre-empt tightening of liquidity conditions ahead of expected tax-related outflows in March — the end of the financial year typically sees advance tax payments pulling cash from the banking system.
Open Market Operations (OMO): Mechanism and Impact
Open Market Operations are the purchase or sale of government securities (G-Secs and Treasury Bills) by the central bank in the secondary market. OMOs are one of the most powerful tools in the RBI's monetary policy toolkit because they have a direct and lasting impact on the money supply — unlike repo operations which are short-term.
Key Details
- OMO Purchase (buying G-Secs): RBI pays money to banks/institutions in exchange for G-Secs, thereby injecting rupees into the banking system — increasing liquidity. Banks now have more funds to lend.
- OMO Sale (selling G-Secs): RBI absorbs money from banks by selling G-Secs, reducing liquidity and money supply — used during inflationary conditions.
- OMOs create "durable" or "permanent" liquidity, unlike repo rate operations (which inject short-term liquidity for one to fourteen days) or the Liquidity Adjustment Facility (LAF).
- OMO purchases also lower yields on G-Secs (bond prices rise as demand increases), thereby reducing the cost of government borrowing and signalling lower interest rates to the market.
- Since 1991 economic reforms, OMOs have become more important than the Cash Reserve Ratio (CRR) as the primary liquidity management instrument.
The RBI's ₹1 lakh crore OMO purchase plan is a direct application of this mechanism — injecting durable liquidity into the banking system ahead of year-end tax outflows, while also supporting government borrowing by keeping G-Sec yields manageable.
Government Securities (G-Secs): What They Are
Government Securities are debt instruments issued by the central government (or state governments, in which case they are called State Development Loans/SDLs) to borrow money from the market. They are guaranteed by the sovereign and are considered risk-free instruments.
Key Details
- G-Secs are issued in two broad categories: Treasury Bills (T-Bills) — short-term, with maturities of 91 days, 182 days, and 364 days; and Dated Securities — medium to long-term, with maturities of 2 to 40 years.
- The interest rate on G-Secs is called the coupon rate, and G-Secs trade at yields (the effective return to the investor) in the secondary market.
- When RBI buys G-Secs in the open market, demand rises → bond prices rise → yields fall → lending rates across the economy tend to fall.
- Banks and financial institutions are mandated to hold a minimum fraction of their deposits in G-Secs under the Statutory Liquidity Ratio (SLR) requirement, making G-Secs a central element of India's banking regulatory framework.
- The securities purchased in this tranche include bonds maturing between 2030 and 2053 — across short, medium, and long durations — reflecting RBI's intent to provide liquidity across the yield curve.
The specific G-Secs cited (6.01% 2030, 6.33% 2035, 7.30% 2053) are existing dated securities bought from the secondary market — their purchase by the RBI injects money into the hands of the sellers (banks and institutions) and lowers yields for those maturities.
RBI's Liquidity Management Framework
The RBI manages liquidity in the banking system through a multi-instrument framework under the Liquidity Adjustment Facility (LAF) and other mechanisms. The primary goal is to keep the overnight call money rate near the policy repo rate — the benchmark interest rate set by the Monetary Policy Committee (MPC).
Key Details
- Repo Rate: The rate at which commercial banks borrow short-term funds from the RBI against collateral (G-Secs). This is the main policy rate set by the MPC.
- Standing Deposit Facility (SDF): The floor of the LAF corridor — rate at which banks park excess funds with the RBI without collateral. Set below repo rate.
- Marginal Standing Facility (MSF): The ceiling — rate at which banks borrow emergency overnight funds from the RBI. Set above repo rate.
- Variable Rate Repo (VRR) and Reverse Repo (VRRR): Short-term (14-day) auctions through which RBI injects or absorbs liquidity.
- OMOs and Currency Swaps: Longer-duration tools for managing structural (durable) liquidity surpluses or deficits.
- The Market Stabilization Scheme (MSS) is used for sterilising foreign exchange inflows — RBI sells additional T-Bills and bonds to absorb rupee liquidity created by forex purchases.
The OMO purchase signals a shift towards durable liquidity injection, complementing the rate-cut cycle that the MPC had already initiated, ensuring that rate cuts actually transmit to lower borrowing costs across the economy.
- OMO purchase on 9 March 2026: ₹50,000 crore (first of two tranches)
- Total planned OMO: ₹1,00,000 crore (second tranche: 13 March 2026)
- Cumulative OMO purchases in 2026 so far: approximately ₹2.50 lakh crore
- Largest security purchased: 6.33% G-Sec maturing 2035 — ₹13,507 crore
- Government Securities are sovereign-guaranteed, risk-free debt instruments
- OMOs create "durable" (permanent) liquidity, unlike repo (short-term, 1-14 days)
- RBI Act, 1934: provides statutory framework for RBI's monetary policy operations
- Monetary Policy Committee (MPC): 6-member body (3 RBI + 3 government nominees) sets policy repo rate
- Statutory Liquidity Ratio (SLR): mandatory minimum G-Sec holding for banks — currently 18%