The Reserve Bank of India has announced a fresh set of policy actions aimed at strengthening liquidity conditions in the banking system after assessing current financial market dynamics. The central bank said the measures are designed to ensure sufficient and lasting liquidity, particularly during periods of elevated cash outflows that often strain short-term funding conditions.
As part of the initiative, the RBI will carry out open market operations to purchase government securities valued at approximately $22.30 billion. These purchases will be executed in four equal installments of about $5.57 billion each. The scheduled operations will take place toward the end of December 2025 and continue through January 2026, allowing liquidity to be infused in a phased and orderly manner. The approach is intended to support smooth market functioning while reinforcing the availability of credit across the economy.
In addition to domestic bond purchases, the central bank will conduct a USD-INR buy-sell swap auction worth $10 billion with a three-year maturity in mid-January 2026. This foreign exchange operation is expected to provide longer-term liquidity support, helping banks better manage funding requirements over an extended period. By combining open market operations with forex-based tools, the RBI aims to deliver both immediate and durable liquidity to the financial system.
These steps come in response to a temporary tightening of liquidity conditions caused by seasonal factors such as advance tax payments and goods and services tax collections. Such obligations typically lead to higher cash withdrawals from the banking system, creating short-term funding pressure. Current estimates suggest that system liquidity is running at a deficit of roughly $6.11 billion.
Despite this temporary shortfall, the RBI has remained actively engaged in liquidity management through a range of instruments, including variable rate repo auctions, earlier bond purchases, and currency swap operations. The latest announcement reinforces the central bank’s commitment to maintaining financial stability and ensuring the effective transmission of monetary policy.
By deploying a coordinated mix of domestic and foreign exchange liquidity tools, the RBI continues to signal its readiness to respond swiftly to changing market conditions. The measures are expected to strengthen confidence in the banking system, support orderly financial markets, and create a stable environment for economic activity to continue gaining momentum.
