Reserve Bank of India Injects Record $28.85 Billion to Stabilize Rupee and Boost Liquidity

The Reserve Bank of India (RBI) is set to infuse a record 2.50 trillion rupees ($28.85 billion) into the banking system through an overnight variable rate repo auction on Wednesday. This marks the central bank’s largest single-day liquidity injection in over a year.

The move follows the RBI’s aggressive intervention in the foreign exchange (FX) market over the last two sessions to stabilize the rupee. On Monday, the central bank reportedly sold between $4 billion and $7 billion, with further dollar sales continuing on Tuesday. Traders attribute these actions to efforts aimed at countering portfolio outflows and concerns over U.S. trade tariffs, which have weighed on the Indian currency.

India’s banking system liquidity deficit has surged fourfold in less than a week, reaching approximately 2 trillion rupees as of February 10. Analysts cite tax outflows and the RBI’s significant dollar sales as key reasons behind this sharp liquidity drain.

The RBI’s forex interventions aim to curb volatility and support the rupee, which has been under pressure amid global economic uncertainties. By injecting funds into the banking system, the central bank seeks to maintain liquidity balance and ensure smooth financial operations.

This historic liquidity infusion underscores the RBI’s proactive approach to managing market fluctuations and stabilizing the rupee against external headwinds.