RBI to pump almost Rs 1.5 lakh cr into banking system this month, Pg15

Key Highlights:

• The Reserve Bank of India (RBI) will inject approximately Rs 1.5 lakh crore into the Indian banking system in December 2025.
• This injection includes purchasing Central Government bonds worth Rs 1 lakh crore and a USD/INR Buy Sell swap of $5 billion (approximately Rs 45,000 crore).
• The repo rate has been reduced by 25 bps to 5.25 percent, the lowest in over three years.
• These measures aim to ensure adequate liquidity and facilitate monetary transmission.

Detailed Insights:

• The RBI's interventions in the foreign exchange market to stabilize the rupee have reduced liquidity in the banking system.
• The average interest rate on new bank loans increased by 14 bps to 8.64 percent in October 2025, influenced by liquidity availability.
• The USD/INR Buy Sell swap involves the RBI buying dollars from banks and providing rupees, with a resale of dollars after three years at a predetermined rate.
• The rupee has been the worst-performing Asian currency in 2025, hitting lows due to free trade agreement delays and foreign investor pullouts of over $18 billion.
• RBI sold $44 billion in the first half of FY26 to defend the rupee, a significant decrease from nearly $400 billion in FY25.
• The liquidity drain from foreign exchange intervention in FY26 (until November) is approximately Rs 3.4 lakh crore.

Key Concepts Involved:

• Repo Rate: The rate at which the RBI lends money to commercial banks.
• Monetary Transmission: The process by which policy changes made by the central bank affect economic activity.
• USD/INR Buy Sell Swap: A tool used by the RBI to manage liquidity and foreign exchange reserves.