RBI to Infuse ₹2.90 Lakh Crore Liquidity via Bond Buys, USD Swap
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- Last Updated: 24 Dec 2025 at 12:55 PM IST
The Reserve Bank of India (RBI) announced open market operations (OMO) through government security purchases and USD–INR buy/sell swap auctions to provide durable liquidity to the banking system, as heavy advance tax and GST payments had caused a liquidity deficit.
These operations will enable banks to maintain stability in their financial positions while providing an infusion of approximately ₹2.90 lakh crore, which aids credit flow at the end of the year, and will likely support banking liquidity levels as well as overall economic activity levels.
How Did Liquidity Deficit Emerge?
On December 17th the banking system returned to a liquidity deficit. Prior to this return to deficit, the Reserve Bank of India provided several forms of support to the banking system, including variable rate repos and OMOs.
The liquidity deficit is currently estimated at approximately ₹54,851.83 crore. The deficit is primarily due to tax payments leading to outflows from the banking system. The Reserve Bank of India (RBI) intervened in a way that restored balance to the banking system without changing its policies regarding borrowing/lending rates.
Deficits of this type often lead to a constraint on interbank interest rates; therefore, action taken by the central bank(s) is taken in order to prevent "spillover" to regulated credit markets, which most often leads to an increase in the cost of borrowing for all retail and wholesale lenders. Interventions provide immediate support as well as ongoing support.
OMO Purchase Schedule Details
In regard to the OMO purchase schedule, the RBI has announced a total of ₹2 lakh crore in OMO purchases in 4 different batches of ₹50,000 crore each. The schedule for these purchases is December 29, 2025; January 5, 2026; January 12, 2026; and January 22, 2026.
These purchases of government securities will increase liquidity on an ongoing basis through the expansion of the central bank's balance sheet. Since they will be made on a staggered basis, this will allow for the controlled absorption of this excess liquidity into the market.
The purchase of bonds will directly support the steady state of interest rates. The ongoing flow of tax payments will create a drain on the banking system's ability to lend/borrow overnight, and will therefore necessitate the need for support from the central bank.
USD Swap Auction Mechanics
An auction will be conducted on January 13, 2026, for $10 billion at a three-year tenor for the USD/INR Buy/Sell Swap auction providing foreign exchange (FX) liquidity and preventing depletion of foreign exchange reserves. The swap will allow banks to convert dollars to rupees immediately and revert back later, relieving immediate funding pressures. The Swap serves as a complement to Open Market Operations to address the need for liquidity related to volatility in the rupee.
Through swaps, the Reserve Bank of India (RBI) retains the ability to intervene in the foreign exchange market while enhancing liquidity in the domestic economy.
As the RBI is expected to utilise ₹2,00,000 crore worth of open market operations along with USD 10 billion in swaps to address the ₹54,851 crore liquidity deficit, the key question for the market will be how effective these measures prove to be.
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