RBI’s $5 Billion Swap Auction: A Simple Guide to India’s New Liquidity Move

FAQs

Q1: What is the size of the RBI’s swap auction announced on May 26?
Ans:  The RBI will conduct a $5 billion USD-INR buy/sell swap auction.

Q2: What is the tenor of this swap operation?
Ans:  The tenor is three years.

Q3: Why is the RBI conducting this swap auction?
Ans:  To inject long-term liquidity into the banking system amid rupee weakness and global market risks.

Q4: How does a USD-INR buy/sell swap work in simple terms?
Ans:  Banks sell dollars to RBI now and receive rupees. They commit to buying back the same dollars after three years.

Q5: What is the minimum bid size for participating banks?
Ans:  The minimum bid size is USD 10 million.