The (Reserve Bank of India (RBI) has announced fresh liquidity infusion measures to support the banking system, citing a review of current liquidity and financial market conditions.
Over the next month, the central bank will inject around $32 billion of rupee liquidity through a combination of Open Market Operations (OMO) and a dollar–rupee foreign exchange swap.
Key Liquidity Measures Announced by RBI
- OMO Bond Purchases:
RBI will purchase Rs 2 trillion (around $22.34 billion) worth of Government of India securities. - The OMO purchases will be conducted in four tranches of Rs 50,000 crore each.
- OMO Auction Dates:
December 29, 2025
January 5, 2026
January 12, 2026
January 22, 2026 - FX Swap:
RBI will conduct a $10 billion, 3-year dollar–rupee buy/sell swap on January 13, 2026.
Details of December 29 OMO Purchase
For the December 29 operation, RBI will conduct a multi-security OMO auction using the multiple price method, with a total purchase size of Rs 50,000 crore.
Eligible government securities include bonds maturing between 2029 and 2053. RBI has clarified that there is no security-wise notified amount, and it retains full discretion over acceptance and allocation.
Record Liquidity Infusion in 2025
With this latest announcement, RBI continues its aggressive liquidity support stance. In calendar year 2025 so far, the central bank has already infused a record Rs 6.50 trillion through open market bond purchases.
RBI has also conducted multiple dollar–rupee FX swaps during the year to ease rupee liquidity pressures.
- Most recent FX swap before this announcement:
$5 billion, 3-year swap on December 16, 2025
Why This Matters
These measures are aimed at ensuring orderly liquidity conditions in the banking system, especially amid tight cash balances, heavy government borrowing, and year-end funding pressures.
Higher liquidity typically helps:
- Stabilize short-term interest rates
- Support credit growth
- Ease pressure on bond yields
- Improve transmission of monetary policy
RBI’s Forward Guidance
RBI stated that it will continue to closely monitor evolving liquidity and market conditions and take further measures as needed to maintain financial stability.
Detailed operational instructions for each liquidity operation will be issued separately.
Source: Reserve Bank of India Press Releases dated December 23, 2025
Rupee Forward Premiums Ease After RBI Swap Move
Rupee forward premiums cooled on Wednesday after pulling back from multi-year highs, as traders took comfort from the central bank’s dollar-rupee buy/sell swap. The swap is expected to absorb excess dollar liquidity, helping rein in the recent sharp surge in premiums.
The USD/INR January month-end forward premium fell to 41 paisa, easing from 58 paisa hit a day earlier. The November month-end premium also retreated to 240 paisa, down from its recent peak of 278 paisa. The move suggests easing pressure in the forward market following policy support from the Reserve Bank of India.
Indian Bonds Rally on RBI Liquidity Support
Indian government bonds saw their biggest rally in four months after the Reserve Bank of India announced fresh liquidity measures, including government bond purchases and a dollar-rupee swap. The steps aim to keep borrowing costs stable and support economic growth amid pressure from higher U.S. tariffs.
The market had been under strain as banking-system liquidity slipped into a Rs 727 billion deficit on Dec. 22, from a Rs 2.6 trillion surplus earlier this month, due to tax outflows and RBI dollar sales. Sentiment improved after data showed investors, including the RBI, bought Rs 47.4 billion of bonds, the most since Nov. 11.
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