NewKerala.com

RBI May Ramp Up Bond Market Operations Amid Global Tensions: SBI Report

A State Bank of India report suggests the Reserve Bank of India may need to conduct more Open Market Operations to manage bond prices and liquidity amid renewed global geopolitical tensions. The report cites conflicts in Venezuela and around Iran, alongside potential political threats to the US Federal Reserve chair, as factors creating market uncertainty. This environment could lead to sustained pressure on domestic liquidity, requiring continued RBI intervention. The central bank has already conducted substantial OMO purchases this fiscal year, and a similar trend may extend into the next.

Key Points: RBI May Need More OMOs for Liquidity, Says SBI Report

  • Global tensions threaten liquidity
  • RBI may need record OMOs
  • FY26 OMO purchases at ₹5.16L cr
  • Volatility may extend into FY27
2 min read

RBI may need to do more open market operations to keep bond prices in check amid global tensions: SBI

SBI report warns global tensions may force RBI to conduct more Open Market Operations to manage bond prices and domestic liquidity in FY26-27.

"RBI may have to now do more OMOS to keep bond prices in check - State Bank of India Report"

New Delhi, January 13

The Reserve Bank of India may now have to conduct more Open Market Operations to keep bond prices in check and manage liquidity conditions effectively, highlighted a report by State Bank of India.

The report noted that after showing signs of considerable easing in geopolitical frictions towards the latter part of 2025, the year 2026 began on a turbulent note.

It stated "RBI may have to now do more OMOS to keep bond prices in check".

According to the report, renewed circles of conflict, ranging from developments in Venezuela to tensions around Iran, are proving counter-intuitive for energy and commodities markets. These events could lead to erratic price movements, marking a clear departure from outcomes that were widely anticipated just days ago.

The report also flagged Greenland as a potential "Waterloo for world realpolitik," highlighting the fragile global environment.

The report further highlighted that the looming threat to the US Federal Reserve chair could have broader implications for global financial markets.

While the Fed chair is both revered and criticised, the position is seen as a vanguard of institutional autonomy, especially since the turbulent days of the Great Depression.

The report suggested that a similar "deja vu" may be in the making. Whether markets react negatively or not could be the defining factor for price volatility in 2026, it added.

Against this backdrop of heightened global uncertainty, the report said a direct fallout could be sustained pressure on domestic liquidity conditions. It noted that the RBI may need to continue with record OMOs during the current fiscal year to ensure adequate and durable liquidity in the system.

So far in FY26, the RBI has already conducted net OMO purchases worth Rs 5.16 lakh crore. Given the prevailing global uncertainties, SBI expects the central bank may have to undertake additional OMO purchases in the remaining part of the fiscal year to support liquidity needs amid ongoing credit growth.

The report added that a similar trend in OMO operations could also extend into FY27.

- ANI

Share this article:

Reader Comments

P
Priya S
As someone with investments in debt funds, I'm closely watching this. More OMOs should help keep yields stable, which is a relief. But the global situation sounds quite worrying - from Iran to Greenland? The world feels very fragile.
R
Rohit P
Rs 5.16 lakh crore already! That's a massive amount. While I understand the need for liquidity, I hope this doesn't lead to inflationary pressures down the line. The RBI has a tough balancing act.
S
Sarah B
Interesting analysis from SBI. The mention of the US Fed chair's position being a potential flashpoint is concerning. Global financial stability often hinges on that office. India's proactive measures seem prudent.
V
Vikram M
The report is right to highlight this. Credit growth is strong, and companies need funds to expand. If global issues dry up liquidity, our growth story could suffer. RBI must keep the taps open, but judiciously.
K
Karthik V
With so much uncertainty, it's better to be safe than sorry. However, I respectfully think there should be more public communication from the RBI on their strategy. Transparency will boost market confidence even more.

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

Leave a Comment

Minimum 50 characters 0/50