Daijiworld Media Network - Mumbai

Mumbai, Jan 23: The Reserve Bank of India (RBI) on Friday rolled out a set of measures aimed at injecting over Rs 2 lac crore into the banking system, signalling proactive steps to ease tightening liquidity conditions.

Following a review of prevailing financial and liquidity dynamics, the central bank said it will deploy a mix of tools, including open market bond purchases, a long-term foreign exchange swap, and a variable rate repo operation to stabilise money markets.

As part of the plan, the RBI will conduct a 90-day Variable Rate Repo (VRR) auction worth Rs 25,000 crore on January 30. Through this mechanism, banks will be able to borrow short-term funds against eligible collateral, with interest rates discovered through a market-based auction rather than being fixed by the central bank.

In another key move, the RBI will conduct a dollar-rupee buy/sell swap auction of $10 billion on February 4, with a tenor of three years. Under this arrangement, banks will exchange dollars for rupees with the RBI and agree to reverse the transaction at a predetermined future rate. This step will help infuse rupee liquidity while keeping foreign exchange reserves intact.

Additionally, the central bank announced open market purchases of government securities worth Rs 1 lac crore. These purchases will be carried out in two tranches of Rs 50,000 crore each, scheduled for February 5 and February 12.

The RBI said that detailed operational guidelines for each of these measures will be issued separately.

Reaffirming its commitment to financial stability, the central bank noted that it will continue to closely track liquidity conditions and market developments, and will take further steps if necessary to ensure smooth and orderly functioning of the financial system.