Setting the repo rate is only half of monetary policy. The other half is making sure the overnight call rate actually trades near that rate, and that depends on how much money banks hold in their accounts with the RBI. The RBI calls this liquidity: the reserves banks hold with it, beyond what they must keep. This part covers the tools the RBI uses to manage those reserves. The main ones are open market operations (OMOs), the outright purchase and sale of government securities, alongside forex swaps, the Market Stabilisation Scheme and the cash reserve ratio. It also explains how the RBI measures liquidity, what pushes it up and down, and how all of this played out between January 2025 and October 2026. In that period liquidity swung from a deficit of ₹3.1 lakh crore to a surplus of more than ₹10 lakh crore, and then almost back to balance.
The policy rates and the LAF corridor are covered in Part 4, repo rate, reverse repo rate and SDF, and the CRR in Part 5, CRR and SLR. The overnight facilities are covered in more detail in LAF and MSF, and how rate changes reach borrowers in the monetary transmission mechanism.
In the news
- 23 October 2026: back to injecting money. The RBI announced a four-day variable rate repo (VRR) for 26 October, after a ₹1 lakh crore seven-day VRR on 19 October. Net LAF absorption fell from ₹4.87 lakh crore on 30 September to ₹0.31 lakh crore on 22 October. Why it matters for the exam: the same month can need both draining (VRRR) and injecting (VRR) operations.
- 13 October 2026: another OMO sale. The RBI sold ₹25,000 crore of government securities; bids totalled ₹55,518 crore. Why it matters for the exam: OMO sales drain liquidity durably, unlike a VRRR, which reverses within days.
- 10 October 2026: Foreign Exchange Risk Reserve. On certain INR forex derivative contracts above US$2 million, banks must now keep a reserve in cash with the RBI equal to 20% of the rupee notional. Why it matters for the exam: cash that banks must lodge with the RBI cannot be lent in the money market, so a regulatory measure can also absorb liquidity.
- 7 October 2026: a ₹5.9 lakh crore surplus. The Governor said the net LAF surplus averaged ₹5.9 lakh crore a day since the August policy, and that the RBI had run 55 VRRR auctions and sold ₹1.0 lakh crore of bonds through OMOs. Why it matters for the exam: this is the "₹1.0 lakh crore of OMO sales" quoted in the October policy.
- 17–28 September 2026: OMO sales. The RBI sold ₹1,00,000 crore of G-secs in three auctions: ₹50,000 crore on 17 September and ₹25,000 crore each on 21 and 28 September. Why it matters for the exam: the RBI sold short- and medium-dated bonds (maturing 2027–2032) to drain money.
- 21 September 2026: US$143.6 billion through the swap window. Banks reported inflows of US$143.6 billion under the RBI's special USD/INR swap facility, US$133.0 billion of it as FCNR(B) deposits. Why it matters for the exam: when the RBI takes in dollars, it pays out rupees, and this flood of rupees caused the 2026 surplus.
- 5 June 2026: measures to attract capital. The RBI offered concessional forex swaps for PSU ECBs and for banks raising fresh 3–5-year FCNR(B) deposits. The facility opened on 8 June. Why it matters for the exam: a measure aimed at the balance of payments can have large side effects on rupee liquidity.
- 23 December 2025: ₹2 lakh crore of OMO purchases and a US$10 billion swap. The RBI announced four ₹50,000 crore purchase auctions and a three-year USD/INR buy/sell swap. Why it matters for the exam: OMO purchases and buy/sell swaps both add durable liquidity.
What open market operations are
Definition and legal basis
The RBI defines open market operations as "the market operations conducted by the RBI by way of sale/ purchase of G-Secs to/ from the market". The power comes from Section 17(8) of the RBI Act, which allows the RBI to buy and sell securities of the Central Government or a State Government.
- An OMO purchase injects money. The RBI pays for the bonds by crediting the seller's bank's current account with it, so bank reserves rise.
- An OMO sale absorbs money. Banks pay for the bonds out of their RBI accounts, so reserves fall.
Unlike a repo, an OMO is outright: nobody agrees to reverse it. The money stays in (or out of) the system until the bond matures or the RBI deals again. That is why the RBI calls OMOs a tool for durable liquidity. Repos and reverse repos under the LAF handle transient (short-lived) swings.
How an OMO is conducted
The RBI does OMOs in two ways:
- Auctions. The RBI announces an amount and a list of securities, banks and primary dealers bid on the RBI's E-Kuber system, and the RBI accepts bids by price. Recent auctions use the multiple price method across several securities, with no fixed amount for each security.
- Screen-based trading on the anonymous NDS-OM platform. Between January and early June 2025, OMO purchases "including through NDS-OM" injected ₹5.2 lakh crore.
The sale auction of 17 September 2026 shows how this works. The RBI offered ₹50,000 crore spread across six securities maturing between 2029 and 2032. It received bids of ₹66,590 crore and accepted ₹50,000 crore, at cut-off yields from 6.60% (7.59% GS 2029) to 7.01% (8.28% GS 2032).
The Monetary Policy Committee does not decide OMOs; it sets only the repo rate (see the Monetary Policy Committee). Liquidity operations are the RBI's own decisions, taken to keep the call rate close to the repo rate.
Special OMOs: Operation Twist and G-SAP
Operation Twist (from December 2019)
On 19 December 2019 the RBI announced a "special OMO": it would buy and sell government securities at the same time, ₹10,000 crore each, on 23 December 2019. It would buy a long bond, the 6.45% GS 2029, and sell four securities maturing in 2020.
Because it bought and sold equal amounts, the net effect on liquidity was roughly zero. The aim was the shape of the yield curve: buying long bonds pushes long-term yields down, and selling short bonds pushes short-term yields up. Markets called it Operation Twist, after a similar 1961 US Federal Reserve operation.
In the first auction the RBI bought the full ₹10,000 crore of the 2029 bond (cut-off yield 6.55%) but sold only ₹6,825 crore of the short bonds. Even a "neutral" twist can change liquidity a little. The RBI ran many more of these: the Annual Report for 2020-21 records nineteen operation twist auctions in that year. One on 10 March 2021 was asymmetric, buying ₹20,000 crore and selling ₹15,000 crore.
G-SAP (2021)
In the April 2021 policy, the RBI announced a G-sec Acquisition Programme (G-SAP): a pre-announced commitment to buy government bonds in the secondary market. Its stated aim was "a stable and orderly evolution of the yield curve" during a large government borrowing programme.
| Programme | Quarter | Amount | Notes |
|---|---|---|---|
| G-SAP 1.0 | Q1 2021-22 | ₹1,00,000 crore | First auction ₹25,000 crore on 15 April 2021; last tranche of ₹40,000 crore included ₹10,000 crore of SDLs |
| G-SAP 2.0 | Q2 2021-22 | ₹1,20,000 crore | Announced 4 June 2021 |
In all, ₹2.2 lakh crore was committed. On 8 October 2021 the Governor said total OMO injection, including G-SAP, was ₹2.37 lakh crore in the first half of 2021-22. Given the "existing liquidity overhang", he said "the need for undertaking further G-SAP operations at this juncture does not arise", while keeping the RBI ready to restart it. Unlike ordinary OMOs, announced a few days ahead, G-SAP committed in advance to a quarterly amount.
The Market Stabilisation Scheme
Why it exists
Before 2004, when the RBI bought dollars to stop the rupee from rising, it sterilised the extra rupees it created by selling government securities from its own portfolio. By 2003–04, with large capital inflows, its stock of securities was running out. The RBI's 2019 Internal Working Group report says the MSS "was introduced in April 2004 to aid sterilisation operations as the security holding of the Reserve Bank was inadequate". The scheme was set up under a Memorandum of Understanding between the Government of India and the RBI.
How it works
- The government issues extra Treasury Bills, Cash Management Bills or dated securities under the MSS, on top of its normal borrowing.
- The money raised drains liquidity from banks. It is kept aside and not spent, so the money stays out of the system.
- The government and the RBI fix a ceiling on MSS issuance each year.
Demonetisation, 2016
The most recent use came after high-value notes were withdrawn on 9 November 2016. Deposits flooded into banks. On 2 December 2016 the government, on the RBI's recommendation, raised the MSS ceiling to ₹6,000 billion (₹6 lakh crore), and the RBI began auctioning Cash Management Bills under the MSS the same day.
MSS vs OMO sales. Both absorb liquidity. An OMO sale uses the RBI's own bonds and is the RBI's decision. MSS uses new government paper, leaves the RBI's bond holdings untouched and has a fixed ceiling. Since 2022 the RBI also has the SDF, which absorbs money without any collateral.
Forex swaps as a liquidity tool
Buy/sell and sell/buy swaps
In a USD/INR buy/sell swap, a bank sells dollars to the RBI today and gets rupees, and agrees to buy the same dollars back on a fixed future date. For the swap's term, the system has more rupees: the swap injects liquidity. A sell/buy swap does the opposite and drains rupees.
Banks bid the premium, in paise per dollar, that they will pay over the spot rate when they buy the dollars back. The RBI accepts the highest premiums first. Unlike an outright purchase of dollars, a swap has a fixed end date, so the rupees it adds leave the system again when it reverses.
The 2025–26 swaps
| Auction date | Amount accepted | Tenor | Reversal |
|---|---|---|---|
| 31 Jan 2025 | US$5.10 bn | 6 months | 4 Aug 2025 |
| 28 Feb 2025 | US$10.06 bn | 3 years | 6 Mar 2028 |
| 24 Mar 2025 | US$10.04 bn | 3 years | 27 Mar 2028 |
| 16 Dec 2025 | US$5.07 bn | 3 years | 18 Dec 2028 |
| 13 Jan 2026 | US$10.00 bn | 3 years | 16 Jan 2029 |
| 4 Feb 2026 | US$10.00 bn | 3 years | 6 Feb 2029 |
| 26 May 2026 | US$5.00 bn | 3 years | 29 May 2029 |
The first auction (31 January 2025) drew bids of US$25.59 billion for US$5 billion. The RBI's Annual Report for 2024-25 says the three swaps of early 2025 injected about ₹2.16 lakh crore of durable liquidity.
The special swap window of 2026
The June 2026 measures used swaps for a different purpose: to attract capital inflows as foreign portfolio investors pulled money out. Under the special facility from 8 June 2026, the RBI offered concessional swaps on fresh FCNR(B) deposits, ECBs and overseas foreign currency borrowings. Banks raised dollars, mostly as FCNR(B) deposits from non-residents, swapped them with the RBI and got rupees. By 18 September 2026 inflows had reached US$143.6 billion, of which US$133.0 billion was FCNR(B) deposits. The RBI's August statement had expected these measures to "aid banking system liquidity". In practice they flooded it: the Governor said in October that system liquidity "increased substantially on account of the recent measures undertaken to attract capital inflows."
What drives system liquidity
Autonomous drivers
The RBI's 2019 Internal Working Group calls the forces that change banks' reserves without the RBI deciding them autonomous drivers. It lists four: cash reserve requirements, government cash balances, currency in circulation and forex operations.
- Currency in circulation (CiC). When people withdraw cash, deposits and bank reserves fall. Demand peaks in the festive season and around elections, and cash returns during the monsoon months.
- Government cash balances. The Centre keeps its cash with the RBI, not with banks. Tax payments (advance tax in mid-June, September, December and March; GST each month) move money from banks to the government and drain reserves. Government spending and the RBI's surplus transfer put it back.
- Forex operations. When the RBI sells dollars to support the rupee, banks pay in rupees and liquidity falls. When it buys dollars, liquidity rises.
- Reserve requirements. A CRR cut frees reserves. The CRR cut from 4% to 3% between September and November 2025 released about ₹2.5 lakh crore. As deposits grow, banks also need more reserves even when the CRR is unchanged.
The arithmetic of 2025-26
The RBI's Monetary Policy Report of April 2026 shows how these factors added up in the second half of 2025-26 (October 2025 to 15 March 2026):
| Item | ₹ crore | Effect |
|---|---|---|
| Currency in circulation | −3,33,512 | Drain (festive and year-end cash demand) |
| Net forex sales by the RBI | −3,14,033 | Drain (defending the rupee) |
| Government cash balances | +1,01,272 | Added |
| Net OMO purchases | +5,88,335 | Added (RBI's offset) |
| Long-term forex buy/sell swaps | +2,26,885 | Added (approximate) |
Currency and forex sales drained ₹6.48 lakh crore; OMO purchases put back ₹5.88 lakh crore and swaps ₹2.27 lakh crore. That is the main job of OMOs: offsetting large, lasting autonomous drains or inflows.
How the RBI measures liquidity: the net LAF position
The formula
The RBI's daily Money Market Operations release defines:
Net liquidity injected = Repo + MSF + SLF − Reverse repo − SDF
Here repo includes VRR auctions, reverse repo includes VRRR auctions, and SLF means standing liquidity facilities such as refinance. A positive number means the RBI is lending, so the system is in deficit. A negative number means the RBI is absorbing, so the system is in surplus. In speeches and reports the RBI usually describes a surplus as "average daily net absorption under the LAF".
The release also gives net durable liquidity, a fortnightly measure of the longer-lasting surplus or deficit. It stood at ₹13.94 lakh crore on 15 September 2026 and ₹10.14 lakh crore on 30 September 2026.
The operating target
The net LAF position is a quantity. The price the RBI targets is the weighted average call rate (WACR). The September 2025 review said the RBI "will endeavour to align the WACR to the policy repo rate by ensuring optimum level of system liquidity". When the surplus is large, the WACR drifts toward the SDF floor: between the August and October 2026 policies it averaged 14 bp below repo.
The September 2025 framework review
An Internal Working Group, whose report was published on 6 August 2025, reviewed the 2020 framework. The RBI finalised the changes on 30 September 2025:
- The WACR remains the operating target, and the symmetric ±25 bp corridor stays.
- The 14-day VRR/VRRR is discontinued as the main operation. Short-term liquidity is now managed "primarily through 7-day VRR/VRRR" and other tenors from overnight to 14 days, at the RBI's discretion.
- OMOs, long-term VRR/VRRR and forex swap auctions remain the durable-liquidity tools.
- Daily CRR maintenance stays at a minimum of 90% of the requirement.
- Standalone primary dealers get access to the SDF, overnight reverse repo and all repo operations.
7-day VRRRs in practice
The 7-day operation is the default, but banks need not bid. On 10 August 2026 the RBI offered ₹2 lakh crore in a 7-day VRRR and received only ₹95,810 crore (cut-off 5.24%). On 1 September it offered ₹6 lakh crore and got ₹1.14 lakh crore. The RBI then leaned on overnight and three-day VRRRs: one three-day VRRR on 4 September absorbed ₹5.42 lakh crore. Most of the 55 VRRR auctions between the August and October policies were shorter than seven days.
Liquidity in 2025–26: a timeline
January–March 2025: deficit and a large rescue
From mid-December 2024 to March 2025 the system was in deficit. Capital outflows and the RBI's dollar sales to defend the rupee drained reserves, along with rising currency in circulation. Net injection under the LAF peaked at ₹3.1 lakh crore on 23 January 2025, and averaged ₹1.56 lakh crore in January–March.
The RBI responded on 27 January 2025 with OMO purchases, a 56-day VRR and a US$5 billion swap, and more followed. By the April 2025 policy it had held eight OMO purchase auctions (₹2.85 lakh crore), three term VRRs (₹1.83 lakh crore) and three buy/sell swaps (₹2.18 lakh crore), about ₹6.9 lakh crore in all. Liquidity turned to surplus on 29 March 2025. The June 2025 statement put total durable injection since January at ₹9.5 lakh crore: ₹5.2 lakh crore of OMO purchases, ₹2.1 lakh crore of term VRRs and ₹2.2 lakh crore of swaps.
April 2025–November 2025: comfortable surplus
OMO purchases continued in April and May 2025 (₹2,39,203 crore), and the surplus rose above ₹3 lakh crore a day in July. The CRR cut (tranches from 6 September to 29 November) then offset festive cash demand and forex sales.
December 2025–March 2026: OMO purchases of ₹5 lakh crore
The surplus narrowed to about ₹0.8 lakh crore in December and January, as festive cash demand and the RBI's forex operations drained reserves. The RBI bought ₹5,00,000 crore of bonds in ten auctions between 11 December 2025 and 13 March 2026. It also did US$25 billion of swaps (December, January and February) and two 90-day VRRs. OMO purchase auctions in 2025-26 totalled ₹7,39,203 crore, close to half of the Centre's gross borrowing, according to press reports.
June–September 2026: the surplus explodes
The FCNR(B) swap window changed everything. Average daily net absorption went from ₹0.9 lakh crore in June to ₹1.2 lakh crore in July, ₹5.8 lakh crore in August and ₹7.8 lakh crore in September. On 3 September the surplus touched about ₹10.3 lakh crore. The RBI ran VRRRs almost daily, and from 17 September it sold bonds outright, its first OMO sale auctions since at least January 2025. In all it sold ₹1,00,000 crore in September and another ₹25,000 crore on 13 October.
October 2026: the surplus drains away
Advance tax and the RBI's absorption operations, including the OMO sales, had already cut the surplus in late September, and it kept falling in October. Net absorption fell from ₹4.87 lakh crore on 30 September to ₹2.42 lakh crore on 15 October and ₹0.31 lakh crore on 22 October. On 19 October the RBI went back to injecting, with a ₹1 lakh crore seven-day VRR, and it has announced another VRR for 26 October. Net durable liquidity was still ₹10.14 lakh crore on 30 September, which is why the October policy promised "an appropriate mix of liquidity management tools".
Worked examples
Example 1: a ₹50,000 crore OMO purchase
The RBI buys G-secs with a face value of ₹50,000 crore from Bank A in an OMO auction.
Step 1: the balance sheets.
- RBI: assets +₹50,000 crore (G-secs); liabilities +₹50,000 crore (Bank A's current account balance).
- Bank A: G-secs −₹50,000 crore; reserves with the RBI +₹50,000 crore. Its deposits do not change.
Step 2: required vs excess reserves. CRR is a share of deposits (NDTL), and Bank A's deposits have not changed. So its required reserves are unchanged and the full ₹50,000 crore is excess reserves.
Step 3: what the bank does with it. In a surplus, the bank parks the money in the SDF or a VRRR, so the RBI's net absorption rises by ₹50,000 crore. In a deficit, the bank borrows less from the RBI, so net injection falls by ₹50,000 crore. Either way the net LAF position moves by ₹50,000 crore toward surplus.
Step 4: the price. Bonds rarely trade at face value. If the cut-off price is ₹102.25 per ₹100 of face value, the RBI pays 50,000 × 102.25 ÷ 100 = ₹51,125 crore, plus accrued interest. The liquidity injected is the cash paid, not the face value.
Variation: the seller is a mutual fund. If a mutual fund sells the bonds, the RBI credits the fund's bank, and the fund's deposit with that bank rises by ₹50,000 crore. Reserves rise by ₹50,000 crore, but required reserves also rise by 3% × 50,000 = ₹1,500 crore. Excess reserves therefore rise by ₹48,500 crore.
Example 2: reading the net LAF figure (22 October 2026)
From the RBI's Money Market Operations release for 22 October 2026 (₹ crore):
| Operations on 22 October | Amount |
|---|---|
| Overnight VRR (injection) | 50,006 |
| MSF (injection) | 3,746 |
| SDF (absorption) | 1,61,742 |
| Net, today's operations | 50,006 + 3,746 − 1,61,742 = −1,07,990 |
| Outstanding operations | Amount |
|---|---|
| 7-day VRR of 19 October (injection) | 1,00,014 |
| 29-day VRRR of 8 October (absorption) | 33,055 |
| SLF availed (injection) | 9,776.05 |
| Net, outstanding | 1,00,014 − 33,055 + 9,776.05 = +76,735.05 |
Net liquidity = −1,07,990 + 76,735.05 = −₹31,254.95 crore. The minus sign means a surplus of about ₹0.31 lakh crore, much smaller than the ₹4.87 lakh crore absorbed on 30 September.
The example has a useful oddity. On the same day, some banks borrowed through the VRR and the MSF while others deposited ₹1.62 lakh crore in the SDF. Liquidity is unevenly spread across banks, and the net LAF figure only shows the total.
Example 3: a buy/sell swap in rupees
The three swaps of early 2025 totalled US$25.20 billion (5.10 + 10.06 + 10.04) and injected about ₹2.16 lakh crore, an implied rate of ₹2,16,000 crore ÷ US$25.20 billion ≈ ₹85.7 per dollar. At ₹86, a US$5 billion buy/sell swap injects 5,000,000,000 × 86 = ₹43,000 crore, which leaves the system again when the swap reverses.
Common exam traps
OMO vs repo. An OMO is an outright purchase or sale, so its effect lasts. A repo or VRR is reversed on a fixed date. Both add liquidity, but only the OMO is "durable".
Who decides OMOs. The RBI, not the MPC. The MPC votes only on the repo rate and the stance.
Buy/sell vs sell/buy. The name is from the RBI's side. In a buy/sell swap the RBI buys dollars first, so it injects rupees.
Sign of the net LAF. "Net absorption" means surplus; "net injection" means deficit. The September 2026 figure of ₹7.8 lakh crore was absorption, so it was a surplus.
G-SAP vs Operation Twist. G-SAP was a pre-announced purchase of a fixed amount. Operation Twist was simultaneous purchase and sale, aimed at the yield curve.
Key facts at a glance
| OMO | Outright purchase/sale of G-secs by the RBI; Section 17(8), RBI Act |
| Purchase vs sale | Purchase injects reserves; sale absorbs them |
| How conducted | Auctions on E-Kuber (multiple price, multi-security) and NDS-OM screen purchases |
| Operating target | Weighted average call rate (WACR) |
| Main short-term operation | 7-day VRR/VRRR (framework of 30 September 2025) |
| Durable tools | OMOs, long-term VRR/VRRR, forex swap auctions |
| Operation Twist | First special OMO on 23 December 2019: buy ₹10,000 crore of 6.45% GS 2029, sell 2020 securities |
| G-SAP | 2021-22: G-SAP 1.0 ₹1 lakh crore (Q1), G-SAP 2.0 ₹1.2 lakh crore (Q2) |
| MSS | April 2004, under a GoI–RBI MoU; ceiling raised to ₹6 lakh crore on 2 December 2016 |
| Early-2025 deficit peak | ₹3.1 lakh crore net injection on 23 January 2025; surplus from 29 March 2025 |
| OMO purchases 2025-26 | ₹7,39,203 crore in auctions (H1 ₹2,39,203 crore; H2 ₹5,00,000 crore) |
| 2026 swap window | Opened 8 June 2026; US$143.6 bn inflows by 18 September (FCNR(B) US$133.0 bn) |
| Peak surplus | ₹7.8 lakh crore average daily net absorption, September 2026 |
| OMO sales 2026 | ₹1.0 lakh crore in September (17, 21, 28 Sep); ₹25,000 crore on 13 October |
| Net LAF, 22 October 2026 | Surplus of ₹31,255 crore |
Exam corner: what to remember
- OMO purchase = injection; OMO sale = absorption. OMOs are durable. LAF repos and reverse repos are transient.
- OMOs, swaps and liquidity operations are the RBI's decisions, not the MPC's.
- Autonomous drivers: currency in circulation, government cash balances, forex operations and reserve requirements.
- Net LAF = Repo + MSF + SLF − Reverse repo − SDF. Negative means surplus.
- Operation Twist: simultaneous buy and sell, from December 2019, aimed at the yield curve. G-SAP: ₹2.2 lakh crore committed in 2021.
- MSS: since April 2004, under a GoI–RBI MoU, for sterilising inflows. Ceiling raised to ₹6 lakh crore after demonetisation (2 December 2016).
- Early 2025: deficit peaked at ₹3.1 lakh crore (23 January). About ₹9.5 lakh crore of durable injection from January to early June 2025.
- Swaps of 2025: US$5 bn (six months, 31 January), US$10 bn (three years, 28 February), US$10 bn (three years, 24 March), US$5 bn (three years, 16 December).
- 2025-26: record OMO purchases of ₹7.39 lakh crore.
- 2026: FCNR(B) swap window → surplus of ₹7.8 lakh crore in September → ₹1.0 lakh crore OMO sales in September and 55 VRRRs → back to VRR injections from 19 October.
- September 2025 framework: WACR target, ±25 bp corridor, 7-day main operation, 90% daily CRR minimum, SDF access for standalone PDs.
For exam-specific syllabus and pattern details, see our pages for RBI Grade B, SBI PO and IBPS PO.
Test yourself
An outright purchase of government securities by the RBI from banks will:
Show answer
Answer: (b) The RBI pays by crediting banks' accounts, and since the purchase is outright, the reserves stay in the system.
The first "Operation Twist" auction by the RBI, buying the 6.45% GS 2029 and selling 2020 securities, was held on:
Show answer
Answer: (c) It was announced on 19 December 2019 and held on 23 December 2019, for ₹10,000 crore each way.
Under G-SAP 1.0, the RBI committed to buy government securities worth:
Show answer
Answer: (d) G-SAP 1.0 was ₹1 lakh crore in Q1 2021-22; G-SAP 2.0 added ₹1.2 lakh crore in Q2.
The Market Stabilisation Scheme was introduced in April 2004 mainly to:
Show answer
Answer: (a) The RBI's own stock of securities was too small to absorb the rupees created by its dollar purchases, so the government issued extra securities under the MSS.
The RBI buys G-secs of face value ₹40,000 crore in an OMO at a price of ₹101.50 per ₹100. Ignoring accrued interest, the liquidity injected is:
Show answer
Answer: (a) ₹40,000 crore × 101.50 ÷ 100 = ₹40,600 crore; the cash paid, not the face value, is what enters the system.
On a given day: repo and VRR outstanding ₹80,000 crore, MSF ₹5,000 crore, SDF ₹1,50,000 crore, VRRR ₹40,000 crore, no SLF. The net LAF position is:
Show answer
Answer: (c) Net injection = 80,000 + 5,000 − 1,50,000 − 40,000 = −₹1,05,000 crore; a negative number means the RBI is absorbing, so the system is in surplus.
In September 2026 the RBI announced OMO sales of:
Show answer
Answer: (b) It announced ₹1,00,000 crore on 11 September 2026 in tranches of ₹50,000, ₹25,000 and ₹25,000 crore (17, 21 and 28 September).
The special USD/INR swap facility opened by the RBI on 8 June 2026 covered inflows through:
Show answer
Answer: (c) It covered FCNR(B) deposits (until 31 August 2026), and ECBs and OFCBs (until 31 December 2026); inflows reached US$143.6 billion by 18 September.
A bank enters a US$10 billion buy/sell swap with the RBI at ₹88 per dollar. The rupee liquidity injected at the start is:
Show answer
Answer: (d) 10,000,000,000 × 88 = ₹880 billion = ₹88,000 crore, reversed when the bank buys the dollars back.
Which of these is NOT an autonomous driver of system liquidity?
Show answer
Answer: (b) OMOs are a discretionary RBI tool used to offset the autonomous drivers.
Further reading
- Report of the Internal Working Group to Review the Liquidity Management Framework (RBI, August 2025): the analysis behind the current framework, including the structural and frictional drivers of liquidity and the case for 7-day operations.
- Report of the Internal Working Group to Review the Liquidity Management Framework (RBI, September 2019): the clearest explanation of autonomous drivers, sterilisation and the origins of the MSS.
- Monetary Policy Report, April 2026, Chapter II (RBI Bulletin): the table of liquidity drivers and management for 2024-25 and 2025-26, with OMO and swap totals.
- RBI Annual Report 2024-25: the RBI's own account of the early-2025 deficit and the measures that ended it.
- RBI press release, Revised Liquidity Management Framework, 30 September 2025: the current rules, with a one-page table of every liquidity instrument.
- Governor's Statement, 7 October 2026: the latest official account of the 2026 surplus, VRRRs and OMO sales.
- RBI FAQs on the Government Securities Market: plain-language answers on G-secs, T-bills, CMBs and OMOs.
Sources
- RBI, Governor's Statement, 7 October 2026: surplus of ₹5.9 lakh crore since August; net absorption ₹1.2, ₹5.8 and ₹7.8 lakh crore in July, August and September 2026; 55 VRRRs and ₹1.0 lakh crore OMO sales; capital-inflow measures as the cause; WACR 14 bp below repo; FCNR(B) and non-resident deposit flows (accessed 24 October 2026)
- RBI, Governor's Statement, 5 August 2026: surplus of ₹1.0 lakh crore since June; net absorption in May–July 2026; special measures to attract capital inflows (accessed 24 October 2026)
- RBI, Governor's Statement, 5 June 2026: net absorption in March–May 2026; US$5 billion swap in May 2026; concessional forex swap for PSU ECBs and FCNR(B) deposits till 30 September 2026 (accessed 24 October 2026)
- RBI, Governor's Statement, 8 April 2026: net absorption in December 2025–March 2026; ₹1.5 lakh crore OMO purchases and US$10 billion swap in February–March 2026 (accessed 24 October 2026)
- RBI, Governor's Statement, 6 February 2026: ₹3.5 lakh crore OMO purchases and US$15.1 billion swaps in December 2025–January 2026; 90-day VRRs (accessed 24 October 2026)
- RBI, Governor's Statement, 5 December 2025: net absorption in August–November 2025 (accessed 24 October 2026)
- RBI, Governor's Statement, 1 October 2025: net absorption in June–September 2025 (accessed 24 October 2026)
- RBI, Governor's Statement, 6 August 2025: net absorption of ₹1.5 lakh crore in April and ₹1.8 lakh crore in May 2025 (accessed 24 October 2026)
- RBI, Governor's Statement, 6 June 2025: ₹9.5 lakh crore durable injection since January 2025 (₹5.2 lakh crore OMOs incl. NDS-OM, ₹2.1 lakh crore VRR, ₹2.2 lakh crore swaps); deficit from mid-December; CRR cut releasing ₹2.5 lakh crore (accessed 24 October 2026)
- RBI, Governor's Statement, 9 April 2025: deficit peak of ₹3.1 lakh crore on 23 January 2025; ₹6.9 lakh crore of measures; surplus from 29 March 2025 (accessed 24 October 2026)
- RBI Annual Report 2024-25: average net injection of ₹1.56 lakh crore in Q4 2024-25; swaps of 31 January, 28 February and 24 March 2025 injecting about ₹2.16 lakh crore (accessed 24 October 2026)
- RBI Bulletin, Monetary Policy Report April 2026, Chapter II: Table II.1 on drivers and management of liquidity; OMO purchase auctions of ₹7,39,203 crore in 2025-26 (accessed 24 October 2026)
- RBI press release, 27 January 2025: OMO purchases, 56-day VRR and US$5 billion six-month swap (accessed 24 October 2026)
- RBI press release, 5 December 2025 and 23 December 2025: OMO purchase tranches and US$5 billion and US$10 billion three-year swaps (accessed 24 October 2026)
- RBI swap auction results: 31 January 2025, 28 February 2025, 24 March 2025, 16 December 2025, 13 January 2026, 4 February 2026, 26 May 2026: amounts, bids, premiums and settlement dates (accessed 24 October 2026)
- RBI OMO auction results, 30 January 2025 to 13 October 2026, for example 17 September 2026 sale, 21 September 2026 sale, 28 September 2026 sale and 13 October 2026 sale: monthly OMO amounts in the chart (accessed 24 October 2026)
- RBI press release, OMO sale announcement, 11 September 2026: ₹1,00,000 crore in three tranches, multiple price method (accessed 24 October 2026)
- RBI press release, swap facility inflows, 21 September 2026: facility opened 8 June 2026; inflows of US$143.6 billion, FCNR(B) US$133.0 billion (accessed 24 October 2026)
- RBI press release, regulatory measures for the forex market, 10 October 2026: Foreign Exchange Risk Reserve of 20% in cash with the RBI (accessed 24 October 2026)
- RBI Money Market Operations releases for 30 September 2026, 15 October 2026 and 22 October 2026: net liquidity formula and figures; net durable liquidity (accessed 24 October 2026)
- RBI VRR/VRRR results: 7-day VRRR, 10 August 2026, 7-day VRRR, 1 September 2026, 7-day VRR, 19 October 2026 and VRR notice, 23 October 2026 (accessed 24 October 2026)
- Free Press Journal, 4 September 2026: three-day VRRR on 4 September 2026 and surplus of about ₹10.3 lakh crore on 3 September (accessed 24 October 2026)
- RBI press release, Revised Liquidity Management Framework, 30 September 2025: WACR target, corridor, 7-day main operation, notice period, durable tools, 90% CRR, SPD access (accessed 24 October 2026)
- RBI, Report of the IWG to Review the Liquidity Management Framework, 2025: definition of system liquidity; FX swaps as durable tools (accessed 24 October 2026)
- RBI, Report of the IWG to Review the Liquidity Management Framework, 2019: autonomous drivers; MSS introduced April 2004 under a GoI–RBI MoU; use in demonetisation (accessed 24 October 2026)
- RBI press release, MSS ceiling, 2 December 2016: ceiling raised to ₹6,000 billion after demonetisation (accessed 24 October 2026)
- RBI press release, 19 December 2019 and results, 23 December 2019: first simultaneous purchase and sale (accessed 24 October 2026)
- RBI Annual Report 2020-21: nineteen operation twist auctions; asymmetric OT of 10 March 2021 (accessed 24 October 2026)
- RBI press release, G-SAP 1.0, 8 April 2021, Governor's Statement, 4 June 2021 and Governor's Statement, 8 October 2021: G-SAP 1.0 and 2.0 amounts; end of G-SAP (accessed 24 October 2026)
- RBI FAQs on the Government Securities Market: definition of OMOs; CMBs (accessed 24 October 2026)
- Reserve Bank of India Act, 1934 (RBI publication): Section 17(8) (accessed 24 October 2026)
- Outlook Money, 18 February 2026: RBI's OMO purchases equal to about 47% of the Centre's gross borrowing in 2025-26 (accessed 24 October 2026)