In response to a review of current liquidity and financial conditions, the Reserve Bank of India (RBI) has rolled out a fresh set of measures to add large-scale liquidity to the banking system.
The Reserve Bank of India (RBI) said it will inject more than $23 billion, or about ₹2 lakh crore, using a mix of open market bond purchases, a foreign exchange swap, and a variable rate repo operation. These steps are aimed at easing liquidity pressures and maintaining orderly market conditions.
As part of the plan, RBI will conduct a 90-day variable rate repo (VRR) operation of ₹25,000 crore on January 30, 2026. Banks will be able to borrow funds at market-linked rates by pledging collateral.
The central bank will also conduct a USD/INR buy and sell swap auction worth $10 billion with a tenor of 3 years on February 4. This move is intended to inject durable rupee liquidity while managing foreign exchange market conditions.
In addition, RBI will purchase government securities worth a total of ₹1,00,000 crore through open market operations (OMOs) in February. These bond purchases will be carried out in 2 tranches of ₹50,000 crore each on February 5 and February 12. RBI said detailed instructions for each operation will be issued separately and that it will continue to track liquidity and market trends closely.
Meanwhile, economists at Indian banks have urged RBI to clearly communicate a commitment to OMO purchases of at least ₹3–5 lakh crore, according to a report by a business daily. They said such guidance could help reduce government bond yields and improve the transmission of earlier rate cuts. They warned that a prolonged liquidity shortage could hurt credit demand and economic growth.
These views were shared during pre-policy meetings held on January 21 and 22, attended by RBI Governor Sanjay Malhotra, Deputy Governor Poonam Gupta, and Indranil Bhattacharyya. An economist said tight liquidity, strong credit growth, and sustained foreign exchange intervention had reduced the impact of earlier OMO purchases.
Participants also pointed to high certificate of deposit rates and uncertainty over the new inflation and GDP series. One suggestion was to reduce the scale of foreign exchange intervention. However, there was broad agreement that RBI should not cut rates in February and should wait for data under the new series.
System liquidity has averaged a surplus of ₹59,356 crore in January. RBI conducted OMO purchases worth ₹3 lakh crore in December and January, taking the total for the current financial year to ₹5.20 lakh crore. The policy decision on the repo rate is due on February 6. RBI has cut the repo rate by 125 basis points to 5.25% since February 2025.
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