The Reserve Bank of India (RBI) revealed plans on Friday to inject more than Rs 2 lakh crore into the banking system to alleviate liquidity stress. This move involves employing open market bond purchases, a foreign exchange swap, and a variable rate repo operation to improve liquidity in the financial sector. The central bank will initiate a 90-day variable rate repo (VRR) operation worth Rs 25,000 crore on January 30, enabling banks to borrow funds at market-driven rates against provided collateral assets.
In addition to the VRR operation, the RBI will conduct a $10 billion dollar-rupee buy/sell swap auction lasting three years on February 4. This initiative allows banks to sell dollars to the RBI for rupees and commit to repurchasing those dollars at a predetermined forward rate. Furthermore, the RBI will engage in open market operations (OMO) by purchasing government securities totaling Rs 1 lakh crore in two installments of Rs 50,000 crore each on February 5 and February 12.
The central bank emphasized that it will issue specific instructions for each operation separately. It also affirmed its commitment to closely monitor liquidity and market conditions, taking necessary steps to maintain orderly liquidity circumstances.
