Press Release: 2025-2026/1635, Dated: 05.12.2025
1. Introduction
The Reserve Bank of India (RBI) has announced a fresh round of liquidity-enhancing measures, which include Open Market Operation (OMO) purchase auctions and a USD/INR Buy/Sell Swap auction. These initiatives are aimed at supporting market liquidity, addressing volatility, and ensuring smooth functioning of financial markets amid evolving domestic and global conditions.
2. Objective Behind the Liquidity Measures
RBI noted tightening liquidity conditions in recent weeks due to factors such as high currency leakage, government cash balances, and global financial uncertainties. The latest measures are designed to inject durable liquidity into the system, stabilise short-term interest rates, and ensure that banks have sufficient funds to meet credit demand and operational requirements.
3. Details of the OMO Purchase Auctions and FX Swap
Under the OMO purchase program, RBI will buy government securities to infuse rupee liquidity directly into the banking system. Simultaneously, the USD/INR Buy/Sell Swap auction will release dollars into the market while absorbing rupee liquidity temporarily, helping manage foreign exchange pressures. Together, these tools offer a balanced approach to currency management and liquidity stabilisation.
4. Expected Impact on Markets and the Banking System
The liquidity injection is expected to ease short-term money market rates, improve banking system liquidity, and support credit flow to productive sectors. The FX swap mechanism may also help curb undue volatility in the rupee. Financial markets generally view such measures as supportive, as they provide clarity on the central bank’s stance toward stabilising financial conditions.
5. Conclusion
RBI’s announcement of OMO purchase auctions and a USD/INR Buy/Sell Swap auction reflects its proactive approach to managing evolving liquidity dynamics. By using both domestic and foreign exchange tools, the central bank aims to maintain orderly market conditions, ensure adequate liquidity, and reinforce financial system stability. These measures signal RBI’s commitment to responsive and effective monetary management.
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