RBI Expands Liquidity with Rs 3 Lakh Cr via OMOs and USD Swap
RBI Expands Liquidity with Rs 3 Lakh Cr via OMOs and USD Swap
RBI unveils a near Rs 3 lakh crore liquidity boost through OMOs and a USD/INR swap to ease cash shortages and steady markets.
The Reserve Bank of India announced a fresh round of liquidity support aimed at easing tight conditions in the banking system. It said it will inject nearly Rs 3 lakh crore through a combination of open market operations and a three-year USD/INR buy-sell swap. The liquidity push includes purchases of government securities worth Rs 2 lakh crore via OMOs in four tranches of Rs 50,000 crore each on December 29, January 5, January 12, and January 22. Additionally, it will conduct a three-year USD/INR buy-sell swap of $10 billion on January 13.
Liquidity in the system has been under pressure, with net system liquidity in deficit at Rs 54,851 crore as of Monday. Market participants had already anticipated sizable injections, with expectations of at least Rs 2 lakh crore before the central bank intervened in the foreign exchange market last week. The primary objective is to offset liquidity drained by forex interventions, as well as seasonal outflows from advances tax payments and a higher currency in circulation.
Earlier steps to curb rupee depreciation had lifted the currency from around 91 per dollar to about 89 per dollar, but those actions absorbed liquidity in the system. The RBI has reassured markets about its liquidity stance. In the latest monetary policy remarks, Governor Sanjay Malhotra signaled the central bank would ensure adequate liquidity even without an explicit target, a message aimed at easing fears of a liquidity crunch.
Analysts say the multi-pronged approach could help stabilise yields and support market confidence, particularly as the economy navigates volatility in FX markets. The RBI's plan underscores a readiness to backstop liquidity while keeping an eye on inflation and growth, even as traders await quarterly data and policy signals.
