RBI Drains Surplus Cash from Banks with ₹50,000 Crore Open Market Securities Sale

Mumbai: The Reserve Bank of India accepted bids worth ₹50,000 crore in the first tranche of its open market operation sale of government securities, stepping up efforts to withdraw surplus liquidity from the banking system.

The central bank accepted ₹7,005 crore of 7.59% government securities maturing in 2029 at a cut-off yield of 6.6007%. It also accepted ₹7,255 crore of the 6.79% GS 2029 at 6.7023%.

For longer maturities, the RBI accepted ₹1,005 crore of the 7.61% GS 2030 at 6.8191% and ₹12,645 crore of the 5.77% GS 2030 at 6.8589%.

Another ₹3,250 crore was accepted in the 6.68% GS 2031 at a cut-off yield of 6.9080%. The largest acceptance was ₹18,840 crore for the 8.28% GS 2032 at 7.0090%.

Liquidity Surplus Remains High

The RBI conducted the government securities sale as surplus liquidity in the banking system remained elevated. RBI data estimated the liquidity surplus at around ₹7.38 lakh crore as of September 16.

During an OMO sale, banks and other investors purchase government bonds from the RBI. Their payments to the central bank remove rupee funds from the financial system, helping it manage excess cash and short-term interest rates.

Two More OMO Tranches

The RBI has announced OMO sales totalling ₹1 lakh crore across three tranches. After Thursday’s ₹50,000 crore transaction, two additional sales of ₹25,000 crore each are scheduled for September 21 and September 28.

Why Banking Liquidity Surged

The banking system accumulated excess funds following strong mobilisation of foreign currency non-resident, or FCNR(B), deposits. Overseas currency brought into India and subsequent swaps with the RBI supplied additional rupee liquidity to banks.

Month-end government spending, including salary and pension payments, also contributed to the liquidity build-up. The planned OMO sales are expected to moderate this surplus and improve monetary policy transmission across financial markets.