Bond market sees more OMO buys after RBI's surplus transfer falls short

Expectations of durable liquidity support via OMO rise after RBI's Rs 2.69-trn dividend transfer disappoints markets and currency leakage trends persist

 

The bond market expects the Reserve Bank of India (RBI) to conduct additional Open Market Operations (OMOs) in the latter half of the current financial year (FY26), particularly during periods of currency leakage. This anticipation arises in light of the RBI’s recent surplus transfer of ₹2.69 trillion to the government, which fell short of some market projections ranging up to ₹3 trillion.

 

The RBI dividend represents a substantial and durable infusion of liquidity into the system. However, its impact on system liquidity will become evident only when government expenditure begins to accelerate. Based on the expenditure pattern in FY25,