RBI bought US$5 billion forex swap

In an effort to boost liquidity in the market ahead of general election, the country’s central bank, RBI has purchased US$ 5 billion through long-term forex swap auction. The central bank has successfully concluded the forex swap auction, buying the targeted US$5 billion as part of the long-term dollar/rupee swap with a three-year tenor. With this, Reserve Bank of India (RBI) has injected nearly Rs. 34,561 crore into the Indian banking system.

In this auction, RBI received bids worth nearly US$16.31 billion for which the cut-off was set at 776 paise. It has accepted US$5.02 billion tendered.

This liquidity infusion was in line with RBI's announcement earlier this month that it would buy dollars from banks for three years and offer them rupees in return. The swap will bulk up India's foreign exchange reserves while injecting liquidity into the financial system to ease a cash crunch typically seen before the beginning of a financial year.

The central bank has bought Rs. 3 lakh crore of bonds this fiscal to support the market at a time when a record US$100 billion borrowing plan of the government had cooled demand for debt.