Short Description:
The RBI has purchased 47% of India’s FY26 government bonds via OMOs, injecting massive liquidity to stabilize yields and support bank lending amid heavy borrowing.
Read Time:
2 minutes, 15 seconds
Main Article:
In a significant move to manage systemic liquidity, the Reserve Bank of India (RBI) has purchased government securities worth nearly half of the central government’s total bond issuances in the current fiscal year. Data reveals that from April 2025 to mid-February 2026, the RBI conducted Open Market Operations (OMO) purchase auctions totaling ₹6.39 lakh crore. This massive intervention, equivalent to 47% of the Centre’s ₹13.65 lakh crore gross borrowing, was aimed at injecting durable liquidity in the banking system to counteract the drying effect of sustained government borrowing.
The large-scale OMO purchases intensified from December 2025 as liquidity conditions tightened, swinging into deficit. By absorbing government securities from the secondary market, the RBI cushioned the banking system, prevented an excessive hardening of bond yields, and ensured overnight rates traded close to the policy repo rate. This action helped maintain orderly market conditions despite volatility driven by geopolitical tensions, oil prices, and higher-than-expected borrowing plans for FY27, which saw the 10-year benchmark yield trade between 6.30-6.70%.
Experts note that these operations, alongside potential FX swaps and positive sentiment from trade deals, have been crucial in mitigating upward pressure on yields from global forces. While the RBI’s proactive stance has ensured adequate funds to support credit growth, the future scale of OMOs may adjust based on capital flows and the deployment of other liquidity management tools.
Short Summary:
The RBI’s strategic purchase of 47% of India’s FY26 government bonds via OMOs provided crucial liquidity support, stabilizing yields and ensuring orderly market function. This intervention counterbalanced heavy government borrowing, supported bank lending, and managed volatility, highlighting the central bank’s active role in maintaining financial system stability through sophisticated liquidity tools.
