RBI has announced ₹1 lakh crore OMO purchases and a $5 billion USD/INR swap to inject durable liquidity amid evolving financial conditions.

Key Highlights of the RBI’s Interventions

• Large-Scale Liquidity Infusion: RBI will purchase government securities (G-secs) worth ₹1,00,000 crore, with ₹50,000 crore scheduled on December 11, 2025, and the remaining later this month.

• Additional Rupee–Dollar Swap: A 3-year USD/INR Buy–Sell swap of $5 billion will be undertaken to inject durable liquidity without targeting exchange rate levels.
• Liquidity Assurance by RBI: RBI reaffirmed its commitment to ensure sufficient durable liquidity considering currency circulation, forex operations, and reserve maintenance needs.

About Open Market Operations (OMOs)

• Open Market Operations (OMOs) are a primary quantitative monetary policy tool, used by central banks like the Reserve Bank of India (RBI) to control the money supply and liquidity by buying or selling government securities in the open market.
• Purpose: OMOs help regulate liquidity, support monetary transmission, and maintain stable financial conditions, especially during volatility or tight liquidity phases.
• Mechanism: RBI purchases securities to infuse liquidity or sells them to absorb surplus funds, thereby influencing money supply and interest rates.

About Dollar-Rupee Swap

• The RBI’s Dollar-Rupee Swap involves the central bank buying dollars from banks for rupees (injecting liquidity) and simultaneously agreeing to sell them back later at a set rate plus premium.
• Purpose: To manage rupee volatility, inject rupee liquidity without depleting dollar reserves, and stabilize the currency by ensuring dollar availability, acting as a key tool for liquidity management and exchange rate stability

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Expected Impact on the Economy

• Improved Banking System Liquidity: The large OMO purchase and USD/INR swap will inject durable liquidity, easing credit conditions and supporting monetary transmission.
• Exchange Rate Stability Without Intervention: RBI clarified that the swap is a liquidity tool, not a currency defence measure, reaffirming confidence in market-driven rupee valuation and strong external fundamentals.
• Growth Support Amid External Challenges: With manageable Current Account Deficit (CAD) of 1.3% in Q2:2025-26, strong forex reserves of 688.1 billion USD, and resilient services exports, enhanced liquidity will help sustain growth as inflation outlook provides policy space.

RBI’s liquidity measures and confidence in external stability signal a proactive, growth-supportive stance, ensuring smooth monetary transmission and resilience despite currency volatility and global uncertainties.

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