Synopsis: The RBI has announced ₹1 lakh crore OMO purchases and a USD 5 billion buy-sell swap in December 2025 to inject durable liquidity into the banking system. These measures aim to ease tightening liquidity ahead of the third instalment of advance tax and ensure smooth market functioning.
RBI to Inject ₹1 Lakh Crore via OMO Purchases; Announces USD 5 Billion Swap
The Reserve Bank of India (RBI) on Friday unveiled major liquidity-boosting measures, including Open Market Operation (OMO) purchases worth ₹1 lakh crore and a USD 5 billion, 3-year USD/INR buy-sell swap to be conducted this month.
RBI Governor Sanjay Malhotra announced the measures while presenting the outcome of the December Monetary Policy Committee (MPC) meeting. The steps are intended to ease the liquidity pressures expected from the upcoming advance tax outflows due on December 15.
Why These Liquidity Measures?
Governor Malhotra explained that the RBI is closely monitoring liquidity conditions and aims to ensure the banking system has adequate funds.
He stated:
“In view of the evolving liquidity conditions, the Reserve Bank has decided to conduct OMO purchases of ₹1,00,000 crore and a 3-year USD/INR buy-sell swap of USD 5 billion this month to inject durable liquidity.”
These actions come at a time when systemic liquidity is experiencing fluctuations due to tax payments, variations in currency demand, and changes in forex operations.
System Liquidity Trends
RBI shared the following liquidity observations based on net absorption under the Liquidity Adjustment Facility (LAF):
- ₹2.9 lakh crore daily absorption in August 2025
- ₹1.6 lakh crore in September
- ₹0.9 lakh crore in October
- ₹1.9 lakh crore in November
- As of December 3: absorption stood at ₹2.6 lakh crore
System liquidity averaged a surplus of ₹1.5 lakh crore since the last MPC meeting in October 2025, indicating adequate but uneven liquidity flow.
RBI Clarifies Purpose of OMO vs LAF Operations
Governor Malhotra emphasized that OMO and LAF operations serve fundamentally different objectives.
- OMO Purchases: Inject durable, long-term liquidity
- VRR/VRRR (repo operations): Manage short-term, transient liquidity
He noted that it is possible for the RBI to inject long-term liquidity through OMOs while simultaneously absorbing short-term liquidity via VRRR, depending on market conditions.
“The primary instrument of monetary policy is the repo rate. OMOs are for liquidity management, not for controlling G-sec yields.”
Assurance to Markets
RBI reaffirmed its commitment to maintaining liquidity stability:
- Ensuring banking system has adequate durable liquidity
- Continuous monitoring of currency circulation and forex flows
- Balancing liquidity without disrupting interest rate signals
These measures are expected to ease funding pressures and support smooth functioning of the financial markets during the year-end liquidity tightening phase.
📌 Key Takeaway
RBI’s decision to conduct ₹1 lakh crore OMO purchases and a USD 5 billion FX swap aims to inject durable liquidity and stabilise money markets ahead of major tax outflows. By balancing OMO operations with LAF tools, the RBI seeks to maintain orderly financial conditions without disrupting policy rate transmission.
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