The Reserve Bank of India (RBI) on Tuesday announced a fresh round of liquidity-enhancing measures aimed at easing tight conditions in the banking system. The central bank plans to inject nearly ₹3 trillion over the coming weeks through a mix of open market operations (OMOs) and a long-term foreign exchange swap.
As part of the initiative, the RBI will purchase government securities worth ₹2 trillion through OMOs. These purchases will be carried out in four equal tranches of ₹50,000 crore each, scheduled for December 29, January 5, January 12, and January 22. The move is expected to provide durable liquidity and support smoother functioning of money markets.
In addition to OMOs, the RBI will conduct a three-year USD/INR buy-sell swap worth $10 billion on January 13. This transaction will release additional rupee liquidity into the banking system by temporarily absorbing dollars in exchange for rupees, a tool the RBI has used effectively in the past.
Market participants said the liquidity injection was largely anticipated, especially after the RBI’s recent interventions in the foreign exchange market. Over the past week, the central bank sold dollars aggressively to contain volatility in the rupee, which had faced pressure due to uncertainty surrounding a potential trade agreement with the United States and sustained foreign portfolio investor outflows from Indian equity and debt markets.
Analysts noted that such foreign exchange interventions tend to tighten rupee liquidity, making the latest measures both timely and necessary. They added that further action would depend on how liquidity conditions evolve and whether additional currency market intervention is required.
During the recent monetary policy meeting, RBI Governor Sanjay Malhotra reiterated the central bank’s commitment to maintaining adequate liquidity. He emphasized that liquidity support would continue even without explicitly targeting a surplus level of around one per cent of net demand and time liabilities.
So far in December, the RBI has already infused about ₹1.45 trillion through bond purchases and forex swaps. Bond market participants welcomed the announcement, noting that conducting OMOs in more liquid securities could improve participation and enhance price discovery.
Earlier this year, the RBI injected around ₹9.5 trillion into the banking system through OMOs, long-term repo operations, and USD/INR swaps, underscoring its proactive approach to liquidity management.
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