India’s central bank announced on Monday a host of measures to inject liquidity into the banking system, including bond purchases and dollar/rupee swaps, which analysts and traders said could be a precursor to a rate cut next month.

The Reserve Bank of India’s (RBI) measures, expected to collectively infuse 1.5 trillion rupees into the banking system, come after months of a cash crunch in the banking system that had pushed up overnight and short-term lending rates.

The urgency that was being felt in the market has been addressed by the RBI through these steps,” said A Prasanna, head of research at ICICI Securities Primary Dealership.

“I think a rate cut would be the next logical action,” Prasanna said, adding the announcements signal that the central bank is more confident about inflation management.

The RBI’s rate-setting panel will announce its policy review on Feb. 7, after the annual federal budget on Feb. 1.

As part of the package, the RBI will buy government bonds worth 600 billion rupees in three tranches and conduct a 56-day variable rate repo auction worth 500 billion rupees on Feb. 7, it said.

It will also conduct a USD/INR buy/sell swap auction of $5 billion for a tenor of six months on Jan. 31.

The RBI “will continue to monitor evolving liquidity and market conditions and take measures as appropriate to ensure orderly liquidity conditions,” it said.

India’s banking system liquidity deficit had widened to a one-year peak in the previous fortnight.

The daily average banking system liquidity deficit jumped to 2.39 trillion rupees in the fortnight that ended on Jan. 24, as per latest RBI data. Liquidity has been in short supply due to slow government spending.

Treasury officials, who had met the central bank three weeks ago, had suggested longer-term repos, forex swaps and bond purchases to bridge the cash deficit in the banking system.

The benchmark bond yield could drop 5 basis points when it opens on Tuesday, said Ritesh Bhusari, joint general manager for treasury at South Indian Bank.

Yields had dipped on Monday after data showed the RBI had already started buying bonds to infuse liquidity after announcing regular overnight repo auctions intended to give comfort to the markets.