RBI Conducts ₹50,000 Crore Open Market Operation to Boost Liquidity

Towards the end of 2025, the banking system in India faced a noticeable liquidity deficit. To stabilise conditions the Reserve Bank of India (RBI) stepped in with a major liquidity infusion. Through Open Market Operations (OMO), the central bank injected ₹50,000 crore into the system.

What Is the News About?

• The Reserve Bank of India (RBI) injected ₹50,000 crore by purchasing Government Securities (G-Secs) through an OMO purchase auction.
• This move was aimed at addressing the liquidity deficit of ₹62,302 crore, recorded on December 28, 2025.
• Out of seven notified securities, the RBI purchased six G-Secs, signalling its intent to provide durable liquidity to banks.

Details of the OMO Auction

During the auction,

• RBI purchased G-Secs worth ₹50,000 crore
• Cut-off yields were better than market expectations for several bonds
• Long term bond prices remained firm after the auction
• Market participants, however, remained cautious due to the upcoming supply of state government bonds.

Why Did RBI Inject Liquidity?

The banking system was facing tight liquidity conditions due to multiple factors.

Key reasons include,

• High currency in circulation during the festive season
• Advance income tax and GST outflows
• Muted or delayed government spending
• RBI’s unsterilized forex market interventions, which drained durable liquidity

Together, these factors reduced the availability of funds for banks.

What Are Open Market Operations (OMO)?

Open Market Operations are tools used by the RBI to manage liquidity.

In an OMO purchase, the RBI buys government bonds from banks, injecting money into the system.

This helps,

• Increase liquidity
• Support credit flow
• Stabilize interest rates

OMO purchases provide durable liquidity, unlike short-term repo operations.

Upcoming RBI Liquidity Measures

The RBI has announced three more OMO purchase auctions, each worth ₹50,000 crore.

Scheduled dates are,

• January 5, 2026
• January 12, 2026
• January 22, 2026

This indicates RBI’s continued focus on easing liquidity stress.

Role of Other RBI Instruments

Apart from OMO purchases, RBI has used additional tools.

• Variable Rate Repo (VRR) auctions to keep overnight rates aligned with the repo rate
• USD/INR buy sell swap (3 year tenor) to inject rupee liquidity
• These measures ensured that short-term interest rates remained stable despite liquidity pressures.

Static Background: Liquidity Deficit

A liquidity deficit occurs when banks demand for funds exceeds available liquidity.

Persistent deficits can,

• Push up short-term interest rates
• Restrict credit growth
• Affect financial stability

Hence, RBI actively manages liquidity to align it with policy objectives.

Key Takeaways

• RBI injected ₹50,000 crore via OMO
• Liquidity deficit stood at ₹62,302 crore
• OMO purchases provide durable liquidity
• Three more auctions planned in January 2026
• RBI also used VRR and forex swaps

Question

Q. RBI injects durable liquidity into the banking system primarily through:

A. Cash Reserve Ratio
B. Open Market Operations
C. Marginal Standing Facility
D. Bank Rate