RBI's USD 10 Billion Forex Swap: A Liquidity Boost

The Reserve Bank of India will conduct a USD 10 billion forex swap auction on March 24 to inject liquidity into the banking system. The auction involves banks selling US dollars to the Reserve Bank and agreeing to repurchase them after 36 months. The process's cut-off will depend on the premium bids.

The Reserve Bank of India (RBI) announced on Monday plans to conduct a USD 10 billion forex swap later this month, a move designed to infuse liquidity into the nation's banking system.

The USD/INR Buy/Sell swap auction is set for March 24, and will involve a 36-month tenor. During the auction, banks will sell US dollars to the RBI and simultaneously pledge to repurchase an equivalent amount at the end of the swap period.

Market participants need to bid on the premium they are willing to offer, measured in paisa terms up to two decimal places. The auction's cut-off will be determined based on these premium bids, according to a central bank statement.

(With inputs from agencies.)