RBI Unleashes Liquidity Boost With ₹2 Lakh Crore Bond Buys and $10 Billion Forex Swap

The Reserve Bank of India (RBI) announced a major liquidity infusion measure on December 23, 2025, to address tightening money market conditions and support banking system liquidity ahead of year-end outflows. The central bank will conduct open market operations (OMO) to purchase government securities worth an aggregate ₹2 lakh crore in four tranches of ₹50,000 crore each. The purchases will be conducted through competitive bidding on the RBI's Core Banking Solution (CBS) platform, with the first tranche scheduled for December 24, 2025.

In addition to the OMO purchases, the RBI will conduct a $10 billion forex swap auction on December 24, 2025, to inject rupee liquidity into the banking system. The swap will involve selling dollars spot and buying them back after three months, providing immediate rupee liquidity to banks while allowing the RBI to manage foreign exchange reserves effectively. This dual approach—bond purchases and forex swaps—aims to ease liquidity pressures arising from advance tax outflows, government spending patterns, and seasonal year-end demand for cash.

The liquidity tightening has been evident in recent money market rates, with the weighted average call rate hovering close to the upper end of the RBI's liquidity adjustment facility (LAF) corridor. The RBI's proactive intervention is expected to stabilize short-term rates, support credit growth, and ensure smooth functioning of the financial system during the final quarter of the fiscal year. Market participants welcomed the announcement, viewing it as a timely and calibrated response to maintain adequate liquidity without signaling any shift in the overall monetary policy stance.

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The OMO purchases will be conducted at market-determined prices, allowing flexibility in yields while injecting durable liquidity into the system. Combined with the forex swap, the total liquidity infusion is expected to provide significant relief to banks and help moderate borrowing costs in the money market. The RBI has reiterated its commitment to maintaining a neutral liquidity stance while responding dynamically to evolving conditions in the banking sector.

This coordinated action underscores the RBI's proactive management of liquidity in a high-growth environment, balancing domestic funding needs with external stability. The measures are likely to provide stability to bond yields and support overall financial market sentiment in the near term.

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