MUMBAI (Economy India): In a decisive move to ease liquidity conditions in the banking system, the Reserve Bank of India (RBI) on Tuesday announced a ₹2 lakh crore Open Market Operations (OMO) purchase of government securities along with a $10 billion USD/INR buy-sell swap auction.
The central bank said the OMO purchases and swap auctions will be conducted in phases between December 29, 2025, and January 22, 2026, signalling proactive liquidity management amid tightening financial conditions.
Liquidity Support Amid Systemic Tightness
The twin measures are aimed at infusing durable liquidity into the banking system at a time when liquidity conditions have been under pressure due to factors such as advance tax outflows, currency leakage, and global financial volatility.
By purchasing government securities through OMOs, the RBI will inject rupee liquidity directly into the system, while the dollar-rupee swap will help augment domestic liquidity without impacting foreign exchange reserves.
Dollar-Rupee Swap Explained
Under the USD/INR buy-sell swap, the RBI will buy dollars from banks in the near leg and sell them forward, effectively injecting rupee liquidity into the system while managing forex market stability. Such swaps are often used to provide medium-term liquidity support without altering the policy stance.
Market participants view the move as a strong signal that the central bank is focused on ensuring orderly liquidity conditions while maintaining flexibility in its monetary policy toolkit.
RBI to Remain Watchful
In its statement, the RBI said it will continue to closely monitor evolving liquidity and market conditions and take appropriate steps as required.
“The Reserve Bank will continue to monitor evolving liquidity and market conditions and take measures as appropriate to ensure orderly liquidity conditions,” the central bank said.
Market Implications
Analysts said the liquidity infusion is likely to:
- Support short-term money market rates
- Ease pressure on bank funding costs
- Provide comfort to bond markets
- Improve credit transmission
However, they added that global cues, including US interest rate expectations and capital flow trends, will remain key factors influencing domestic financial conditions.
The announcement comes at a time when the RBI is balancing inflation management with the need to support growth and financial stability in a volatile global environment.
(Economy India)
