Open Market Operations (OMO) and RBI’s Liquidity Injection

  • 11 Mar 2026

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The Reserve Bank of India (RBI) recently conducted Open Market Operation (OMO) purchase auctions of Government Securities (G-Secs) worth ?50,000 crore to inject liquidity into the banking system. The move was undertaken amid pressure on the Indian rupee and tight liquidity conditions in the financial system. OMOs are an important monetary policy tool used by the RBI to regulate liquidity and maintain stability in financial markets.

What are Open Market Operations (OMO)?

Open Market Operations refer to the purchase and sale of government securities by the RBI in the open market to manage liquidity in the banking system.

Types of OMOs:

  • OMO Purchase
    • RBI buys government securities from banks or financial institutions.
    • This injects liquidity into the banking system as banks receive funds in exchange for securities.
  • OMO Sale
    • RBI sells government securities to banks or market participants.
    • This absorbs excess liquidity from the system, helping control inflationary pressures.

Through these operations, the RBI influences money supply, interest rates, and overall financial stability.

Government Securities (G-Secs)

Government Securities (G-Secs) are tradable financial instruments issued by the government to borrow money from the market.

Types of Government Securities:

  • Treasury Bills (T-Bills)
    • Short-term instruments with maturity less than one year.
    • Issued only by the Central Government.
  • Government Bonds or Dated Securities
    • Long-term instruments with maturity one year or more.
    • Issued by the Central Government.
  • State Development Loans (SDLs)
    • Bonds issued by State Governments to finance their expenditure.

Because these securities are backed by the sovereign, they carry virtually no default risk and are therefore called risk-free or gilt-edged instruments.

Reasons for the Recent OMO Purchase

The RBI’s decision to purchase ?50,000 crore worth of G-Secs was aimed at:

  • Injecting liquidity into the banking system.
  • Stabilising financial markets during periods of tight liquidity.
  • Easing pressure on the rupee by improving domestic liquidity conditions.
  • Supporting smooth functioning of the government securities market.