On February 28, The Reserve Bank of India (RBI) conducted a $10 billion US dollar-rupee swap to inject long-term liquidity into the financial system. Here’s a simplified breakdown:
Swap Details:
• The RBI held a USD/INR Buy/Sell swap auction worth $10 billion.
• This swap has a 3-year duration and was aimed at providing long-term liquidity.
Auction Results:
• The auction was oversubscribed by 1.62 times, showing strong demand.
• The RBI received 244 bids and accepted 161 bids, totaling $10.06 billion.
Settlement Dates:
• The swap will be settled on March 4 and March 6, 2025.
How the Swap Works:
The swap is a simple buy/sell foreign exchange deal: the RBI buys US dollars from banks in exchange for rupees and agrees to sell the dollars back later.
Purpose of the Swap:
• The RBI is using this swap to increase the amount of rupee liquidity in the system for a longer duration, addressing the system’s ongoing liquidity needs.
Rupee Exchange Rate:
• The Indian rupee was trading at 87.46 against the US dollar with a decline of 28 paise when the auction took place.
Past Similar Actions:
In January, the RBI had announced a liquidity injection of over Rs 1.5 lakh crore, including a $5 billion forex swap.
