RBI announces $5 billion dollar-rupee swap, auction scheduled for May 26

The Reserve Bank of India (RBI) on Tuesday announced a $5 billion USD/INR buy-sell swap auction scheduled for May 26 as part of efforts to inject long-term liquidity into the banking system, PTI reported.

The move also comes at a time when the rupee has weakened sharply against the US dollar amid continued global uncertainties.

"On a review of current and evolving liquidity conditions, it has been decided to conduct a USD/INR Buy/Sell swap auction of USD 5 billion for a tenor of three years," the central bank said in a circular.

The proposed transaction will be structured as a simple buy-sell foreign exchange swap from the RBI's side.

Under the arrangement, banks will sell US dollars to the central bank and simultaneously agree to buy back the same amount of dollars at the end of the three-year swap period.

The RBI said market participants will be required to submit bids based on the premium they are willing to pay for the tenor of the swap, expressed in paisa terms up to two decimal places.

The cut-off for the auction will be decided based on the premium offered.

The central bank said the auction will follow a multiple price mechanism, under which successful bids will be accepted at their respective quoted premiums.

According to the guidelines, the minimum bid size for participation will be $10 million and thereafter in multiples of $1 million.


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