The Reserve Bank of India has announced a ₹1.25 lakh crore bond purchase despite surplus liquidity in the system. Citi India says this aligns with RBI’s strategy to speed up monetary transmission by maintaining a specific liquidity surplus target, irrespective of market rates.

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• RBI to buy ₹1.25 lakh cr bonds via Open Market Operations
• Move aims at faster rate cut transmission, not immediate liquidity need
• Liquidity target now 1% of banks’ net deposits (NDTL), says Citi economist
• Overnight and 3-month CD rates not driving OMOs anymore
• RBI’s ₹2 trillion dividend to govt in May to boost durable liquidity
• Short-term bond yields to fall more than long-term ones
• Lending rates may dip below 9% in coming months
• Durable liquidity still below RBI’s 1% NDTL target
• Rupee expected to remain stable with slight depreciation bias
• Forex forward maturities could offset some liquidity gains