India's RBI to deliver up to $16b liquidity boost for bond markets

MUMBAI, Dec 5 (Reuters): The Reserve Bank of India lowered its key interest rate on Friday and announced measures to infuse up to $16 billion into the banking system this month in the form of debt purchases and a foreign exchange swap.

The RBI reduced the repo rate by 25 basis points to 5.25 per cent and maintained its "neutral" stance, citing record low retail inflation and a benign outlook for prices.

The central bank will conduct open-market purchases of bonds worth up to 1 trillion rupees ($11.1 billion) and a $5 billion dollar-rupee buy/sell swap, Governor Sanjay Malhotra said.

The debt purchases will be conducted on December 11 and December 18, while the three-year FX swap will take place on December 16.

This would be the first time since May that the central bank will conduct an OMO auction. The RBI bought bonds worth 4.84 trillion rupees between January and May.