Core Viewpoint - The Reserve Bank of India (RBI) is implementing a significant liquidity injection of nearly Rs 3 trillion into the banking system through open-market operations (OMOs) and a foreign exchange buy-sell swap to address liquidity deficits and seasonal pressures [1][5][14]. Group 1: Liquidity Measures - The RBI will purchase Government of India securities worth Rs 2 trillion through OMOs, conducted in four tranches of Rs 50,000 crore each on December 29, January 5, January 12, and January 22 [3]. - Additionally, a three-year USD-INR buy-sell swap of $10 billion will be undertaken on January 13 [3]. - The RBI has already infused Rs 1.45 trillion of durable liquidity in December through OMO purchases and forex buy-sell swaps [9]. Group 2: Current Liquidity Conditions - As of Monday, net liquidity in the banking system was in deficit by Rs 54,852 crore [4]. - The RBI's liquidity injection aims to offset the drain caused by recent forex interventions and seasonal pressures, including advance tax outflows and increased currency circulation [5]. - Durable liquidity was estimated at around Rs 3.3 trillion as of mid-December and is expected to rise to about Rs 3.6-3.7 trillion by the end of the month [14]. Group 3: Market Reactions and Expectations - Market participants expect further actions from the RBI will depend on the evolution of liquidity conditions and the necessity for additional currency market interventions [7]. - The RBI's recent measures are viewed as timely and adequate, with the potential for more actions in the fourth quarter if pressures persist [8]. - Despite the liquidity measures, government bond yields have continued to rise, indicating limited transmission to the bond market [11]. Group 4: Future Outlook - The scale of OMO purchases is expected to improve demand-supply dynamics in the bond market and ease pressure on yields [12]. - Economists caution that the scope for a sustained decline in yields remains limited due to emerging fiscal concerns, including significant government bond redemptions and potential state borrowing pressures [15][17]. - The latest OMOs and swaps are primarily countermeasures to offset liquidity drained by forex interventions and may not significantly impact bond yields [16].