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Maintaining dovish stance, RBI undertakes measures to boost liquidity

ICICIdirect Research 26 Dec 2025 DISCLAIMER

Announcement: The Reserve Bank of India said it will purchase government securities worth ₹ 2 lakh crore and conduct a USD 10 billion buy/sell dollar-rupee swap auction to inject liquidity in the banking system. RBI is doing these liquidity measures to ensure there is no liquidity being drained out of the system due to forex intervention (RBI is selling USD to prevent INR depreciation).
Debt Market Reaction: RBI also seems to manage the debt market sentiments which had been hit by the continuous upwards pressure on bond yields. The 10-year bond yield which had inched up to 6.67% (40 bps higher than the lows it witnessed before August rate cut) has cooled-off by around 13 bps post the liquidity announcement and currently is trading around 6.54%. Higher bond supply particularly from state Governments, expectations of no further rate cut and FPI selling has led to current upward pressure on yields. 
Dovish RBI under new Governorship: RBI has cut interest rates by 125 bps in 2025 and the RBI Governor, multiple time, has emphasized on prioritizing growth through rate cuts and liquidity measures. RBI has already reduced risk weightages to multiple segments (credit card and personal loans, NBFCs) to support credit growth.
Liquidity infusion will enhance money supply in the banking system enabling smother and effective transmission of policy rate cut. From lenders perspective, liquidity infusion will ensure support to margins while aiding incremental disbursement (across segments) and thus credit growth. While adequate systemic liquidity remains beneficial across players including banks and NBFCs, SBI, HDFC Bank, Bank of Baroda and IDFC First Bank remains few of the key beneficiaries given their size and asset liabilities mix.

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