New Delhi, Dec. 5 -- The Reserve Bank of India (RBI) will infuse about Rs.1.45 trillion of liquidity into the banking system, governor Sanjay Malhotra said on Friday while announcing policy rate decisions.

This infusion will be through a mix of open market operation (OMO) purchases of Rs.1 trillion and another Rs.45,000 crore ($5 billion) through a three-year US dollar-rupee swap.

Under OMO purchases, the central bank buys government bonds from banks and, in turn, injects money into the banking system. On the other hand, foreign exchange swaps involve the RBI purchasing dollars from banks against rupees held by them, thus infusing liquidity into the system. It then sells back the dollars at a later date, in this case, three years.

The ...