The Reserve Bank of India (RBI) has announced to inject liquidity into India’s Banking System. The central bank plans to inject nearly ₹3 trillion into the system over the coming weeks through open market operations (OMOs) and a foreign exchange swap. Recently, the RBI reduced the policy repo rate to 5.25%. This reduction was expected to have an impact on liquidity.
Open Market Operations refer to the buying or selling of government securities by the central bank in the open market. When the central bank buys government bonds, it injects liquidity into the banking system. When it sells government bonds, it absorbs liquidity from the system. A foreign exchange swap is a transaction where the central bank buys foreign currency (usually US dollars) now, and agrees to sell it back at a future date at a pre-decided rate. This process injects rupee liquidity into the system in the short term and does not permanently change foreign exchange reserves, because the transaction is reversed later.
How will the RBI increase Liquidity?
Under this plan, RBI will buy government securities worth ₹2 trillion through OMOs. These purchases will be done in four equal tranches of ₹50,000 crore each. The auctions will be held on December 29, January 5, January 12, and January 22.
In addition, RBI will conduct a three-year US Dollar–Rupee buy-sell swap worth $10 billion on January 13. This move is expected to release more rupee liquidity into the banking system.
During the recent monetary policy meeting, RBI Governor Sanjay Malhotra said the central bank would ensure adequate liquidity in the financial system. He added that liquidity support would continue even without formally targeting a surplus level of around one per cent of net demand and time liabilities.
So far in December, RBI has already injected about ₹1.45 trillion of durable liquidity through bond purchases and foreign exchange swaps.
After reviewing current liquidity and financial conditions, RBI confirmed that the government securities purchases will be carried out in four tranches of ₹50,000 crore each on December 29, 2025, January 5, 2026, January 12, 2026, and January 22, 2026.
The Dollar–Rupee swap auction will take place on January 13, 2026. RBI said it will continue to monitor liquidity and market conditions and take steps as needed to maintain orderly liquidity in the system.
