RBI To Inject Liquidity Via Large Bond Purchases, $10 Billion Forex Swap
RBI will buy government securities via open market operations (OMO) for an aggregate amount of Rs 2 lakh crore in four tranches of Rs 50,000 crore each.
The Reserve Bank of India on Tuesday announced mega bond purchases and dollar-rupee swap auction to inject liquidity into the banking system.
The central bank will buy government securities via open market operations (OMO) for an aggregate amount of Rs 2 lakh crore in four tranches of Rs 50,000 crore each. The OMO auctions will be held on Dec. 29, 2025, Jan. 5, 2026, Jan. 12 and Jan. 22.
It will also conduct a USD/INR buy/sell swap auction of $10 billion for a tenor of three years on Jan. 13, 2026. In such swaps, the RBI buys dollars from lenders and pledges to sell them at a later date. This soaks up extra dollars lying in the banking system.
Detailed instructions for each operation shall be issued separately, the RBI said. "The Reserve Bank will continue to monitor evolving liquidity and market conditions and take measures as appropriate to ensure orderly liquidity conditions," it added.
The RBI has already injected Rs 6.5 lakh crore this calendar year via OMO purchases. OMOs are a key monetary policy tool to control money supply, manage liquidity and influence interest rates.
The yield on the benchmark 10-year government bond ended 4 basis points lower at 6.63%, ahead of the announcement.
As of Dec. 22, banking sector liquidity stood at nearly Rs 55,000 crore. It has been in positive territory since Dec. 16. Before that, there was liquidity deficit for much of October and whole of November, as per RBI data.
The RBI conducted foreign-exchange buy-sell swaps in maturities of up to one-year on Tuesday, Bloomberg News reported, a move that cooled a sharp rise in hedging costs.
The move comes after some lenders had individually requested the central bank to carry out short-term foreign-exchange swaps, such as one-to-three-month deals. Such swaps would allow banks to deploy excess dollars they hold after recent RBI interventions to support the rupee, they said.
Earlier this month, the RBI carried out a $5 billion swap auction for three years, rather than the short tenor operations that banks were seeking.
Under central bank rules, banks must limit their dollar exposure. Foreign lenders, in particular, often swap surplus dollars into rupees to meet these requirements, especially toward the year-end.
