The central bank’s decision to flood the system with cash is a “counter-balancing” act. When the RBI sells dollars to protect the rupee, it inadvertently sucks rupees out of the banking system. This intervention aims to replenish that cash to keep interest rates from spiking.
The Infusion Breakdown
The ₹2.15 lakh crore package is divided into three distinct operational tools:
| Operation Type | Amount | Scheduled Date | Impact |
| Open Market Operations (OMO) | ₹1,00,000 Crore | Feb 5 & Feb 12, 2026 | Durable, long-term cash injection by buying govt bonds. |
| USD/INR Buy-Sell Swap | $10 Billion (~₹92k Cr) | Feb 4, 2026 | Injects rupees for 3 years while bolstering FX reserves. |
| Variable Rate Repo (VRR) | ₹25,000 Crore | Jan 30, 2026 | Short-term (90-day) funding relief for commercial banks. |
Why the Intervention? The “January Squeeze”
Market analysts point to a “perfect storm” of liquidity-draining factors that forced the RBI’s hand:
- The Rupee Slide: The rupee plunged to nearly 92 per dollar this week. To fight this, the RBI sold dollars, which automatically reduced the rupee supply in banks.
- FII Outflows: Foreign Institutional Investors have pulled out over ₹36,000 crore from Indian equities in the first three weeks of 2026 alone.
- Seasonal Tax Payments: Massive outflows for GST and advance tax payments in late December and early January traditionally drain bank coffers.
- Credit-to-Deposit Ratio: With credit demand remaining high but deposit growth slowing, banks have faced a “liquidity deficit” of approximately ₹55,000 crore as of mid-January.
Market Impact: A “Dovish” Signal?
The announcement had an immediate impact on the bond and currency markets:
- Bond Yields: The yield on the benchmark 10-year government bond cooled significantly, as the RBI’s plan to buy ₹1 lakh crore worth of bonds ensures a steady buyer in the market.
- Forex Reserves: Interestingly, the $10 billion swap helped push India’s total forex reserves past the $700 billion mark for the first time, providing a psychological buffer against further currency attacks.
- Interest Rates: By easing the cash crunch, the RBI is ensuring that banks don’t hike lending rates prematurely, supporting economic growth despite the global headwinds.
Conclusion: Proactive Stability
The RBI’s massive ₹2.15 lakh crore push signals that the central bank is willing to use its full toolkit to ensure that “market plumbing” remains smooth. By choosing a mix of domestic OMOs and foreign exchange swaps, Governor Sanjay Malhotra is attempting to stabilize the rupee without choking the domestic credit market. All eyes now move to the February 6 Monetary Policy Committee (MPC) meeting to see if this liquidity surge will be followed by further interest rate guidance.
