With an aim to meet the durable liquidity needs of the system, the Reserve Bank of India (RBI) is all set to inject Rupee liquidity for longer duration through long-term USD/INR Buy/Sell swap. Accordingly, the RBI will be conducting a USD/INR Buy/Sell swap auction of $10 billion for a tenor of 3 years.
The three-year swap auction will be held on February 28, 2025. The market participants would be required to place their bids in terms of the premium that they are willing to pay to the Reserve Bank for the tenor of the swap, expressed in paisa terms up to two decimal places. The auction cut-off would be based on the premium. The auction would be a multiple-price based auction, i.e., successful bids will get accepted at their respective quoted premium.
The swap entails the central bank purchasing dollars from banks against the rupee while contracting to sell the greenback at a future date. When the central bank buys dollars, it injects an equivalent quantum of rupee liquidity. This is the second such swap in recent weeks as the monetary authority tries to curb a liquidity deficit in the banking system. Late last month, it injected $5 billion via a six-month foreign-exchange swap.
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