The Reserve Bank of India (RBI) has announced plans to purchase government securities worth Rs 1.25 lakh crore in May through open market operations (OMO). The purchases will be made in four tranches, with the first tranche of Rs 50,000 crore scheduled for May 6, followed by three more tranches of Rs 25,000 crore each on May 9, May 15, and May 19. The RBI will issue detailed instructions for each tranche separately.

This move is aimed at injecting liquidity into the system and ensuring orderly liquidity conditions. The central bank has been actively using the OMO route to manage liquidity conditions in the domestic banking system. In the previous month, the RBI had purchased government securities worth Rs 20,000 crore through a similar drive.

Open market operations involve the buying or selling of government securities by the RBI to manage the supply of money and adjust liquidity conditions in the market. The RBI uses this tool to adjust the rupee liquidity conditions on a durable basis. When there is excessive liquidity in the market, the RBI sells government securities, and when there is a shortage of liquidity, it buys government securities.

The RBI will accept electronic bids from eligible participants through its Core Banking Solution system, called E-Kuber, and the outcome of the auction will be announced on the same day. The central bank has reiterated its commitment to monitoring evolving liquidity and market conditions and taking necessary steps to ensure orderly liquidity conditions in the system.

The move is expected to have a positive impact on the bond market and the overall liquidity situation in the country. The RBI’s decision to purchase government securities is seen as a measure to infuse liquidity into the system and support economic growth. With the economy facing challenges due to the pandemic, the RBI’s move is expected to provide a boost to the market and help stabilize the financial system.