Why is the Reserve Bank of India injecting Rs 2.90 lakh crore?

The RBI is injecting this amount to ease tight cash conditions and stabilize short-term interest rates that have risen above the central bank's target.

How will the RBI inject Rs 2.90 lakh crore into the banking system?

The injection will be carried out through open market operations (bond purchases) and a dollar-rupee swap auction.

What impact will the RBI's intervention have on the bond market?

The measures are expected to stabilize yields, improve market sentiment, and provide confidence around liquidity availability.

Home / Business and Economy / RBI Pumps Rs 2.90 Lakh Crore to Ease Cash Crunch

RBI Pumps Rs 2.90 Lakh Crore to Ease Cash Crunch

24 Dec

•

Summary

Central bank injects Rs 2.90 lakh crore via bond purchases and currency swap.
Tight cash conditions pushed short-term rates above the policy target.
Measures aim to stabilize yields and improve market sentiment.

RBI Pumps Rs 2.90 Lakh Crore to Ease Cash Crunch

The Reserve Bank of India announced a substantial liquidity infusion of Rs 2.90 lakh crore into the banking system. This measure is designed to alleviate tight cash conditions that have caused short-term interest rates to surpass the central bank's policy target, specifically the repo rate of 5.25%. The injection will occur through open market operations involving the purchase of government bonds and a significant dollar-rupee swap.

The bond purchases will take place in four tranches of Rs 50,000 crore each, scheduled for December 29, January 5, January 12, and January 22. Additionally, a $10 billion buy/sell swap auction is planned for January 13 to ease dollar liquidity. These actions follow previous liquidity infusions that failed to sustain stability, as tax outflows contributed to renewed tightening.