RBI to conduct USD-INR swap auction of $10 bn for 3 years’ tenor to inject liquidity 

RBI to inject $10 billion through USD-INR Buy/Sell swap auction for three years, aiming to stabilize currency and boost liquidity.

To meet the durable liquidity needs of the system, the Reserve Bank of India (RBI) has decided to inject Rupee liquidity for longer duration through long-term USD-INR Buy/Sell swap auction.

Accordingly, the RBI will conduct a USD-INR Buy/Sell swap auction of $10 billion for a tenor of three years.

The auction time has been fixed from 10.30 am to 11.30 am on February 28, 2025. The spot date is March 4, 2025 and the far leg date is March 6, 2028.

“The market participants will be required to place their bids in terms of the premium that 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 RBI said in a circular. 

“The auction cut-off would be based on the premium. The auction would be a multiple-price based auction, i.e., successful bids will get accepted at their respective quoted premium,” it added.

This will be the second swap auction by the RBI in a month. On January 31, it had infused $5.1 billion through a six-month swap. 

Commenting on the development Dilip Parmar, Research Analyst, HDFC Securities said, “There will be a short-term positive impact on the Rupee. The swap mechanism can help stabilise the currency by providing immediate liquidity support, thereby mitigating the pressure on the rupee during periods of foreign fund outflows.”