RBI announces third tranche of stimulus ahead of MPC as rupee hits new low

The central bank will purchase government securities worth ₹50,000 crore each on 5 February and 12 February, whereas it will auction dollar/rupee swaps of three years on 4 February, it said in a release.

“The Reserve Bank will continue to monitor evolving liquidity and market conditions and take measures as appropriate to ensure orderly liquidity conditions," it said.

In addition, RBI also announced a 90-day Variable Rate Repo (VRR) operation of ₹25,000 crore to be conducted on 30 January. A variable-rate repo auction is a liquidity tool for the central bank, which it uses to inject short-term liquidity into the banking system. Banks borrow funds at a rate determined by the market through an auction process, rather than the fixed repo rate.

This is the third such tranche of liquidity measures announced by the RBI since the first, announced alongside the monetary policy statement in December 2025. RBI had then said it would conduct OMO purchases worth ₹1 trillion and a dollar-rupee buy/sell swap of $5 billion. During the post-policy conference, governor Sanjay Malhotra had reiterated the RBI's stance to support system liquidity but did not give any clear direction on future liquidity measures.

This was followed by RBI doubling the scale of operations when, late December, it announced OMO purchases of ₹2 trillion and a dollar-rupee buy/sell swap auction of $10 billion, to be conducted in January 2025.

Rupee under pressure

The regulatory announcement comes hours after the Indian rupee touched a record low of 91.97 against the US dollar intraday as a selloff in domestic equities added to ongoing pressure from dollar outflows and importer payments. The domestic currency later pared some losses to end slightly higher at 91.96. Prior to this, it had hit an all-time low of 91.75 against the dollar on 21 January.

In 2026 so far, foreign institutional investors (FIIs) have net sold shares worth ₹36,587 crore, with selling intensifying over the past week. The benchmark indices ended nearly 1% lower today, recording losses of around 2.5% for the week, further pressuring the rupee. This has also led to persistent RBI interventions in the foreign exchange market to curb excessive rupee volatility.

Market participants have been asking the central bank to infuse more durable liquidity into the system, as liquidity conditions remain tight despite several such measures announced by the RBI. System liquidity has also been under pressure due to heavy borrowing by the central and state governments, which is expected to reach around ₹30 trillion.

In a pre-policy interaction with RBI, economists and market participants urged the central bank to focus on easing liquidity in the banking system rather than cutting interest rates further, Mint reported on 22 January, citing multiple sources. Suggestions from market participants included the RBI publishing an indicative OMO calendar, possibly up to ₹5 trillion, for the next financial year to provide greater predictability. Other suggestions included longer-term variable-rate repos (VRRs) as short-duration VRRs were seen as offering only transient relief, and even a targeted long-term repo operation (TLTRO), the report had said.

RBI’s Monetary Policy Committee will next meet on 4-6 February for its last such meeting for the current financial year. The central bank has so far cut the policy repo rate by a cumulative 25 basis points since February 2025.