The RBI has announced Rs 1250 bn OMO purchases for May-25, to be concluded before the transfer of dividend to the government continues to infuse durable liquidity
Download ReportQuantEco Research || RBI’s liquidity salvo getting sharper
The RBI started infusing durable liquidity from Dec-24, with the initial set of measures aimed at sterilizing its past FX interventions along with addressing seasonal outflows like demand for cash and reserve maintenance. Liquidity conditions have indeed improved dramatically in the last four months and now appear comfortable with call rate trading ~15 bps below the policy repo rate. However, the central bank continues to infuse durable liquidity – after conducting OMO purchase of Rs 1200 bn in Apr-25, it has announced Rs 1250 bn OMO purchases for May-25, to be concluded before the transfer of dividend to the government – which is expected to be at a record high. We conclude that the RBI appears to be emphatically aligning liquidity conditions with the MPC’s accommodative policy stance and could be open to a moderate overshoot of soft markers for liquidity comfort in the current economic environment marked by heightened risks to hasten monetary policy transmission. We now expect the RBI to announce Rs 1.2-1.5 tn worth OMO purchase in H2 FY26 and fine tune our 10Y g-sec yield call to 6.00% (by Mar-26) from 6.20% earlier.