Mumbai, Dec 23 (NationPress) The Reserve Bank of India (RBI) has unveiled a new initiative aimed at infusing a substantial amount of capital into the banking sector to alleviate the ongoing liquidity crunch.

Utilizing a combination of open market operations (OMOs) and a foreign exchange swap, the central bank is set to introduce approximately Rs 3 trillion into the financial system in the upcoming weeks.

As part of this strategy, the RBI will acquire government bonds valued at Rs 2 trillion through OMOs.

These acquisitions will occur in four equal segments of Rs 50,000 crore each on December 29, January 5, January 12, and January 22.

Additionally, the central bank plans to execute a three-year USD/INR buy-sell swap of $10 billion on January 13, which will further enhance rupee liquidity in the banking sector.

Market analysts noted that such a significant liquidity injection was largely anticipated, especially following the RBI's recent dollar sales in the foreign exchange market last week.

The primary trigger for the liquidity strain has been the RBI’s recent actions in the currency market. Last week, the central bank actively sold dollars to curb a sharp depreciation of the rupee, which had weakened due to uncertainties surrounding a potential trade agreement with the US and ongoing foreign portfolio investor withdrawals from Indian equity and debt markets.

Market observers believe the RBI’s latest move is timely and adequate for the moment. They indicated that any additional measures would depend on the evolution of liquidity conditions and whether the central bank needs to intervene again in the foreign exchange market. If pressures persist, further actions could be anticipated in the fourth quarter.

During a recent monetary policy meeting, RBI Governor Sanjay Malhotra assured market participants that the central bank would maintain sufficient liquidity within the banking system.

He emphasized that this support would continue even without a formal target of surplus around 1 percent of net demand and time liabilities.

Thus far in December, the RBI has already infused approximately Rs 1.45 trillion of durable liquidity through a combination of bond purchases and forex swaps.

Bond market participants noted that conducting OMOs in more liquid government securities could enhance participation and facilitate better price discovery.

When illiquid bonds are utilized, banks often place bids at higher levels to secure gains, diminishing the effectiveness of such operations.

Earlier this year, the RBI had implemented even larger liquidity measures, injecting around Rs 9.5 trillion into the banking system during the first half of the current calendar year.

This intervention helped shift liquidity conditions from a prolonged deficit since mid-December 2024 to a surplus by the close of March 2025. Most of this liquidity support stemmed from open market purchases, alongside long-term repo operations and USD/INR buy-sell swaps.