RBI gets higher demand for second dlr swap auction at $18.65 b

The Reserve Bank Tuesday said it has raised USD 5 billion through the second tranche of the forex swap auctions, which saw an increased response--nearly over three-times the offer of USD 5 billion at USD 18.65 billion--from banks compared to the maiden auctions on held on March 26. The central bank introduced the tool, wherein it buys dollars from banks for three years and offers them rupees in return, last month to bridge the liquidity gap.

In the latest auctions Tuesday, the total amount offered stood at USD18.65 billion against an offer of USD 5 billion, through 255 offers, as against USD 16.31 billion from 240 offers in the earlier instance, the RBI said in a statement. The cut-off premium was 838 paise as against 776 paise in the first auction.

The swap will bulk up the forex reserves on one hand and on the other injects liquidity into the financial system to ease the ongoing cash crunch typically seen before the beginning of a financial year. The liquidity deficit is too bad this time around also because of the ongoing hustings to elect the 17th Parliament. For the week to April 19, the forex kitty stood at around USD 415 billion, inching close to the lifetime peak of a tad over USD 426 billion on April 13, 2018.

The auction came on a day when the RBI announced to mop up Rs 25,000 crore from the conventional open market operations route in May.