Mumbai, February 28: The Reserve Bank of India (RBI) conducted a USD/INR buy/sell swap auction worth $10 billion on Friday, aimed at injecting long-term liquidity into the financial system. The auction, which saw significant demand, was oversubscribed by 1.62 times.
The RBI received a total of 244 bids during the auction, of which 161 were accepted, amounting to a total of $10.06 billion. The settlement of the auction is scheduled to take place on March 4 and March 6.
This swap auction, with a tenor of three years, was executed as a simple buy/sell foreign exchange swap. Under this arrangement, banks sell US dollars to the RBI while agreeing to repurchase the same amount at the end of the swap period.
The move comes at a time when the Indian rupee is facing depreciation pressures, trading at 87.46 against the US dollaramid global uncertainties. On Friday, the rupee further weakened, slipping by 28 paise against the greenback.
Announcing the auction last week, the RBI had stated its intent to address the durable liquidity needs of the financial system by infusing rupee liquidity through long-term USD/INR swaps. This is not the first such measure taken by the central bank—in January, the RBI injected over ₹1.5 lakh crore into the economy using various instruments, including a $5 billion forex swap.
The latest forex swap is expected to provide much-needed liquidity support to banks while also managing volatility in the currency market.