Reserve Bank of India to Conduct $5 Billion USD/INR Forex Swap Auction on May 26.

Reserve Bank to Conduct $5 Billion Buy and Sell Swap Auction

The Reserve Bank of India has announced plans to conduct a $5 billion USD-INR buy and sell swap auction next week to inject long-term liquidity into the banking system. The auction, scheduled to take place on May 26, comes at a time when the Indian rupee has significantly depreciated against the US dollar amid persistent global uncertainties.

As part of its efforts to manage liquidity conditions, the Reserve Bank has decided to conduct a USD/INR Buy/Sell swap auction of $5 billion for a tenor of three years. The swap is a simple foreign exchange transaction where banks will sell US dollars to the Reserve Bank and simultaneously agree to buy the same amount of US dollars at the end of the swap period.

Market participants will be required to place their bids in terms of the premium 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 will be based on the premium, and successful bids will be accepted at their respective quoted premium.

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Key Details of the Swap Auction

The Reserve Bank's decision to conduct the swap auction is aimed at injecting long-term liquidity into the banking system and mitigating the impact of global uncertainties on the Indian economy.