RBI to inject nearly Rs 3 lakh crore via OMOs to offset forex intervention impact
The central bank said it will purchase government securities worth Rs 2 lakh crore through OMOs in four tranches of Rs 50,000 crore each, scheduled for December 29, January 5, January 12 and January 22.
- Dec 23, 2025,
- Updated Dec 23, 2025 9:20 PM IST
The Reserve Bank of India (RBI) on Tuesday announced a fresh round of liquidity support measures, including open market operations (OMOs) and a foreign exchange buy-sell swap, under which it will inject nearly Rs 3 lakh crore into the banking system. The central bank said it will purchase government securities worth Rs 2 lakh crore through OMOs in four tranches of Rs 50,000 crore each, scheduled for December 29, January 5, January 12 and January 22. In addition, the RBI will conduct a three-year USD/INR buy-sell swap of $10 billion on January 13.
The move comes at a time when liquidity conditions in the banking system have tightened. According to the latest data, net system liquidity stood in deficit at Rs 54,851 crore as of Monday. Market participants said the RBI’s action was widely anticipated, with expectations of at least Rs 2 lakh crore in liquidity injection even before the central bank intervened in the foreign exchange market last week.
The primary objective of the measures is to offset liquidity drained by recent forex interventions as well as seasonal pressures such as advance tax outflows and a rise in currency in circulation. Last week, the RBI sold dollars aggressively to curb sharp depreciation in the rupee, which had come under pressure amid uncertainty over a potential trade deal with the United States and sustained foreign portfolio investor (FPI) outflows from equity and debt markets. The intervention helped the rupee strengthen from around 91 per dollar to 89, but also absorbed rupee liquidity from the system.
The RBI had earlier reassured markets about its liquidity stance. In the recent monetary policy meeting, Governor Sanjay Malhotra said the central bank would ensure adequate liquidity in the system even without explicitly targeting a surplus of around 1% of net demand and time liabilities (NDTL).
So far in December, the central bank has infused Rs 1.45 lakh of durable liquidity through open market purchases and foreign exchange buy-sell swaps. Bond market participants noted that OMO purchases in more liquid securities would enhance participation and improve price discovery, as operations in illiquid bonds often clear 2–5 basis points above prevailing market levels, reducing their overall effectiveness.
During the first half of 2025, the RBI injected Rs 9.5 lakh crore of durable liquidity into the banking system, helping shift conditions from a prolonged deficit since mid-December 2024 to a surplus by the end of March 2025. Of this total, Rs 5.2 lakh crore was provided through open market operations, while long-term variable rate repo auctions and USD/INR buy-sell swaps contributed Rs 2.1 Lakh crore and Rs 2.2 lakh crore, respectively.
Bond market participants have welcomed the OMO plans but stressed the importance of conducting purchases in liquid securities to improve participation and price discovery. OMOs in illiquid bonds often clear at higher yields, reducing their effectiveness. So far in December, the RBI has infused Rs 1.45 lakh crore of durable liquidity through OMOs and forex swaps.
Despite these measures, government bond yields have continued to rise. The benchmark 10-year yield has increased by 12 basis points since the 25-basis-point repo rate cut earlier this month, highlighting weak transmission. With the cash reserve ratio tool largely exhausted, OMOs remain the RBI’s primary lever to counter liquidity tightening caused by forex intervention.
The Reserve Bank of India (RBI) on Tuesday announced a fresh round of liquidity support measures, including open market operations (OMOs) and a foreign exchange buy-sell swap, under which it will inject nearly Rs 3 lakh crore into the banking system. The central bank said it will purchase government securities worth Rs 2 lakh crore through OMOs in four tranches of Rs 50,000 crore each, scheduled for December 29, January 5, January 12 and January 22. In addition, the RBI will conduct a three-year USD/INR buy-sell swap of $10 billion on January 13.
The move comes at a time when liquidity conditions in the banking system have tightened. According to the latest data, net system liquidity stood in deficit at Rs 54,851 crore as of Monday. Market participants said the RBI’s action was widely anticipated, with expectations of at least Rs 2 lakh crore in liquidity injection even before the central bank intervened in the foreign exchange market last week.
The primary objective of the measures is to offset liquidity drained by recent forex interventions as well as seasonal pressures such as advance tax outflows and a rise in currency in circulation. Last week, the RBI sold dollars aggressively to curb sharp depreciation in the rupee, which had come under pressure amid uncertainty over a potential trade deal with the United States and sustained foreign portfolio investor (FPI) outflows from equity and debt markets. The intervention helped the rupee strengthen from around 91 per dollar to 89, but also absorbed rupee liquidity from the system.
The RBI had earlier reassured markets about its liquidity stance. In the recent monetary policy meeting, Governor Sanjay Malhotra said the central bank would ensure adequate liquidity in the system even without explicitly targeting a surplus of around 1% of net demand and time liabilities (NDTL).
So far in December, the central bank has infused Rs 1.45 lakh of durable liquidity through open market purchases and foreign exchange buy-sell swaps. Bond market participants noted that OMO purchases in more liquid securities would enhance participation and improve price discovery, as operations in illiquid bonds often clear 2–5 basis points above prevailing market levels, reducing their overall effectiveness.
During the first half of 2025, the RBI injected Rs 9.5 lakh crore of durable liquidity into the banking system, helping shift conditions from a prolonged deficit since mid-December 2024 to a surplus by the end of March 2025. Of this total, Rs 5.2 lakh crore was provided through open market operations, while long-term variable rate repo auctions and USD/INR buy-sell swaps contributed Rs 2.1 Lakh crore and Rs 2.2 lakh crore, respectively.
Bond market participants have welcomed the OMO plans but stressed the importance of conducting purchases in liquid securities to improve participation and price discovery. OMOs in illiquid bonds often clear at higher yields, reducing their effectiveness. So far in December, the RBI has infused Rs 1.45 lakh crore of durable liquidity through OMOs and forex swaps.
Despite these measures, government bond yields have continued to rise. The benchmark 10-year yield has increased by 12 basis points since the 25-basis-point repo rate cut earlier this month, highlighting weak transmission. With the cash reserve ratio tool largely exhausted, OMOs remain the RBI’s primary lever to counter liquidity tightening caused by forex intervention.