During the period between January 30 and February 28, 2025, RBI took liquidity infusion measures, including OMO purchases of ₹1 lakh crore, two USD/INR buy/sell swap auctions (one for six months for $5 billion and the other for three months for $10 billion), and a 56-day Variable Rate Repo (VRR) auction for ₹50,000 crore.RBI has stepped up efforts to deal with the problem of tight liquidity in the system. In the new liquidity measures, RBI will buy back government securities worth Rs 100,000 crore through OMO, i.e., open market operation of government securities. Apart from this, RBI will inject foreign currency worth $10 billion into the system by March 24 through foreign exchange swap, i.e., dollar/rupee buy/sell swap transactions. The RBI will issue separate instructions for this.The Reserve Bank of India on Monday said that it will inject more liquidity into the banking system by conducting purchase auctions and long-term dollar-rupee buy/sell swap transactions through open market operations. The RBI will buy back government bonds worth Rs 1 lakh crore through OMO in two installments of Rs 50,000 crore each. The first auction will be held by March 12 and the second by March 18. Apart from this, RBI has also decided to conduct a dollar-rupee buy/sell swap transaction of $10 billion for 36 months on March 24. The RBI said it will continue to monitor evolving liquidity and market conditions and take appropriate steps to ensure orderly liquidity conditions. In his first bi-monthly monetary policy statement on February 7, RBI governor Sanjay Malhotra said that after being in surplus from July to November 2024, system liquidity—as measured by the average net position under the Liquidity Adjustment Facility (LAF)—turned into a deficit during December 2024 and January 2025. He said the withdrawal of liquidity was mainly due to advance tax payments in December 2024, capital outflows, foreign exchange operations, and a significant increase in currency in circulation in January this year.Malhotra also highlighted the issue that some banks are showing reluctance in lending in the non-collateralized call money market; instead, they are passively depositing money with the Reserve Bank. He urged banks to actively trade among themselves in the uncollateralized call money market so as to make it deeper and more vibrant to get better signals from the Weighted Average Call Money rate (WACR).The governor emphasized that the RBI is committed to providing adequate liquidity in the system. “We have taken several steps in this regard (including daily variable rate repo auctions from January 16, 2025, and the purchase of G-secs through OMOs in January). In addition, a package of measures was announced on January 27, 2025, to inject durable liquidity through OMOs, foreign exchange buy-sell swaps, and 56-day Variable Rate Repos. We will continue to monitor the evolving liquidity and financial market conditions and proactively take appropriate steps to ensure orderly liquidity conditions,” Malhotra said in his statement.Talking on this topic, Malay Sourav, a finance analyst who works at EY, gave his insights on RBI’s plan. He said, “RBI’s plan to boost liquidity through fresh open market operations worth Rs 1 lakh crore and $10 billion. Forex Swap will increase the liquidity in the system and will make cheaper loans available to businesses and thus will boost the overall economic growth of the economy. Forest swaps will help control the volatility of exchange rates and will make imports cheaper.”
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