RBI to Launch $5 Billion USD-INR Swap Auction for Banking Liquidity

RBI's Upcoming Auction Details

The Reserve Bank of India (RBI) is set to initiate a USD 5 billion USD-INR buy and sell swap auction next week, aimed at enhancing long-term liquidity within the banking sector. This auction is scheduled to commence on May 26. The nature of this swap involves a straightforward buy/sell foreign exchange transaction from the RBI's perspective. In this arrangement, banks will sell US dollars to the RBI while simultaneously agreeing to repurchase the same amount at the conclusion of the swap period.

Market participants will need to submit their bids based on the premium they are willing to offer to the RBI for the duration of the swap, which should be expressed in paisa up to two decimal points. The cut-off for the auction will be determined by the premium offered. This auction will follow a multiple price-based format, meaning that successful bids will be accepted at their quoted premiums, as outlined in the RBI's circular.

For this swap auction, the minimum bid size is set at USD 10 million, with subsequent bids in increments of USD 1 million. During the initial phase of the transaction, banks will sell US dollars to the RBI at the FBIL Reference Rate applicable on the auction date.