The Reserve Bank of India (RBI) has decided to use a new tool for the first time to enhance liquidity in the system using which it will buy $5 billion from the banks in a swap deal that is capable of injecting around Rs. 35,000 crores into the system.
Banks will have to deposit dollar funds with RBI with the condition of buying them back from RBI after 3 years. Minimum bid size for the auction has been fixed at $25 million and multiple bids submission by banks will be allowed. However, the aggregate amount of bids submitted by a single eligible entity should not exceed the notified amount of auction.