A $5 billion USD/INR Buy/Sell Swap auction with a three-year term will also be held on December 16, 2025.
“I would like to reiterate that we are committed to providing sufficient sustainable liquidity to the banking system… We are continuously assessing the sustainable liquidity needs of the banking system due to changes in currencies in circulation, foreign exchange transactions and reserve holdings. We will continue to do so going forward,” Governor Sanjay Malhotra said.
The RBI said in a statement that it will organize OMO purchase auctions of government securities (G-Secs) for a total amount of ₹1 lakh crore in two tranches of ₹50,000 crore each, to be held on December 11, 2025 and December 18, 2025.
SBI Economists noted in their Ecowrap report that the OMOs are aimed at easing the downward spirals caused by prepayments of taxes and GST, as well as a targeted increase in credit absorption (through both banks and non-bank sources), even as effective transmission of interest rate cuts remains a priority.
In addition to the OMO, a $5 billion USD/INR Buy/Sell Swap auction will be held on December 16, 2025 for a three-year term.
In the first phase of the above-mentioned swap transaction, banks will sell dollars to the RBI. The RBI will credit the rupee money to the current accounts of the successful bidders. In the reverse part of the swap transaction, the rupee funds along with the swap premium are returned to RBI to recover the dollars.
The Governor noted that while the purpose of purchase (sale) under OMO is to provide (absorb) lasting liquidity, the purpose of repo operations is to manage temporary liquidity to align the operational target – the Weighted Average Call Rate (WACR) – with the policy repo rate (5.25 percent).
“It is therefore entirely possible that on the one hand we inject sustainable liquidity through the purchase of government bonds under OMO and at the same time withdraw temporary liquidity through a VRRR (variable rate reverse repo) operation,” he said.
Malhotra reiterated that the most important instrument of monetary policy is the policy repo rate. Changes in short-term interest rates are expected to feed through to different long-term interest rates.
At the same time, the main purpose of open market operations is to provide sufficient liquidity and not directly impact G-sec returns, he added.
Published on December 5, 2025
#RBI #MPC #announces #liquidity #measures #OMO #purchases #USDINR #swap