India’s central bank to inject 16 billion dollars into the market following rate cut

India’s central bank, the Reserve Bank of India (RBI), has reduced its policy interest rate. On Friday, the Monetary Policy Committee unanimously cut the repo rate from 5.5 per cent to 5.25 per cent, effective immediately, as confirmed by RBI Governor Sanjay Malhotra.

Alongside the rate cut, RBI announced that it will inject 16 billion dollars of liquidity into the Indian market this month. The liquidity will be provided through bond purchases and foreign exchange operations (FX swaps), ensuring smooth financial flows in the banking system.

Since February of this year, RBI has cut rates four times. In February, for the first time in five years, the rate was reduced by 25 basis points. Further reductions of 25 basis points were implemented in April and June, lowering the repo rate to 5.25 per cent. The reduction in repo rates leads to lower lending rates in commercial banks, encouraging greater borrowing and boosting economic activity.

Governor Sanjay Malhotra stated, “Despite a challenging global environment, India’s economy has shown remarkable resilience. Forecasts of inflation have allowed us to remain in a position to support growth.”

Regarding liquidity injection, he added that the central bank will purchase bonds worth 1 trillion rupees (approximately 11.1 billion dollars) and conduct dollar–rupee transactions amounting to 5 billion dollars. Bond purchases are scheduled for 11 and 18 December, and a three-year FX swap will take place on 16 December.

Source- Reuters

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