MUMBAI. The RBI Liquidity Injection of nearly ₹3 trillion will commence over the coming weeks to ease tight cash conditions in the banking system. The Reserve Bank of India (RBI) announced this massive dual-action plan on Tuesday evening. The strategy combines Open Market Operations (OMOs) with a significant foreign exchange swap. This move follows weeks of tightening rupee liquidity caused by the central bank’s aggressive defense of the national currency.
Deploying Tranches via RBI Liquidity Injection
The central bank will purchase government securities worth ₹2 trillion through a series of OMOs. These purchases will occur in four equal tranches of ₹50,000 crore each. The RBI scheduled these operations for December 29, January 5, January 12, and January 22. By buying these bonds, the RBI directly pumps durable cash into the hands of commercial banks.
Furthermore, the RBI will undertake a three-year USD/INR buy-sell swap worth $10 billion on January 13. This specialized tool allows the bank to take in dollars and release an equivalent amount of rupees into the financial system. Market participants had widely anticipated this large-scale intervention to counter recent foreign portfolio investor outflows.
Maintaining Financial System Stability
RBI Governor Sanjay Malhotra recently assured markets that the central bank remains committed to adequate liquidity. He indicated that the regulator would support the system even without formally targeting a specific surplus level. Analysts believe these timely measures will lower short-term borrowing costs for businesses and consumers alike.
Additionally, the choice of liquid government securities for these OMOs should improve market participation. Using high-quality bonds leads to better price discovery and ensures the injection reaches all corners of the economy. The RBI has already infused roughly ₹1.45 trillion this month through similar mechanisms, bringing total December support to historic levels.
The RBI Liquidity Injection serves as a critical buffer against global economic uncertainty. By managing the supply of money effectively, the central bank maintains a “Goldilocks” environment of controlled inflation and steady growth. These operations confirm the RBI’s readiness to act decisively whenever market conditions threaten domestic financial stability.
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