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RBI Unveils Liquidity Injection Measures to Stabilize Banking System

Posted on 5 March 20255 March 2025 by BNW News

The Reserve Bank of India (RBI) on 5 March announced a series of measures to address evolving liquidity conditions in the banking system, aiming to ensure financial stability and support economic activity.

The central bank revealed plans to inject liquidity through two key operations: large-scale bond purchases and a foreign exchange swap auction.

Under the first measure, the RBI will conduct Open Market Operation (OMO) purchase auctions of Government of India securities, totaling ₹1,00,000 crore. The amount will be split into two tranches of ₹50,000 crore each, scheduled for March 12, 2025 (Wednesday), and March 18, 2025 (Tuesday).

OMO purchases involve the RBI buying government bonds from banks, thereby infusing liquidity into the system to ease cash shortages and stabilize interest rates.

In a parallel move, the RBI will conduct a USD/INR Buy/Sell Swap auction worth $10 billion (approximately ₹83,000 crore) on March 24, 2025 (Monday). This 36-month tenor operation entails the central bank purchasing US dollars from banks while simultaneously agreeing to sell them back after three years.

The swap is designed to provide immediate rupee liquidity to banks, alleviating short-term funding pressures and bolstering forex reserves.

The RBI emphasized that these steps are preemptive, reflecting its commitment to maintaining “orderly liquidity conditions” amid fluctuating market dynamics. Liquidity management is critical for ensuring smooth credit flow to productive sectors, stabilizing bond yields, and curbing volatility in foreign exchange markets.

“The Reserve Bank will continue to monitor evolving liquidity and market conditions and take measures as appropriate,” the central bank stated, signaling readiness to deploy additional tools if required. Detailed operational guidelines for both auctions will be issued separately.

The announcement comes amid heightened scrutiny of liquidity trends, with banks recently reporting tighter cash conditions due to higher credit demand and seasonal tax outflows.

Analysts view the RBI’s dual approach—combining bond purchases for domestic liquidity and forex swaps to manage dollar flows—as a balanced strategy to address near-term pressures while safeguarding macroeconomic stability.

Market participants are expected to welcome the measures, which could ease borrowing costs and support growth momentum. The RBI’s proactive stance underscores its focus on ensuring financial markets remain resilient amid global and domestic uncertainties.

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