MUMBAI: The Reserve Bank of India’s 3-year dollar/Indian rupee buy-sell swap drew strong demand on Tuesday, with the auction drawing bids of about $25.03 billion, 2.5 times of the auction size.
The central bank accepted 118 bids at the FX swap auction with the premium cut-off set at 7.48 Indian rupees. A total of 317 bids worth $25.03 billion were received.
The settlement of the initial leg of the FX swap will take place on Friday, through which the RBI will inject Indian rupee liquidity into the banking system. The transaction will be reversed three years later.
The swap is part of the central bank’s measures to inject over $23 billion of Indian rupee liquidity into the banking system, aimed at boosting the transmission of rate cuts. The measures include a 500 billion Indian rupee open market bond purchase scheduled for Thursday.
Indian central bank’s $10 billion FX swap subscribed three times over
The RBI under chief Sanjay Malhotra has stepped up measures to inject liquidity, though some of the infusions have been blunted by FX intervention to support the Indian rupee, Asia’s worst-performing currency this year.
India’s banking system liquidity rose to 2.17 trillion Indian rupees ($23.97 billion) on Tuesday, the highest since December 5.
