The Reserve Bank of India (RBI) has announced a US Dollar/Rupee two-year sell-buy swap auction with a view to elongating the maturity profile of its forward book and smoothening the receivables relating to forwarding assets. The Central bank will undertake a sell/buy swap auction of $5 billion, which will enable access to a wider set of market participants.
Buy Prime Test Series for all Banking, SSC, Insurance & other exams
RBI will conduct a spot sale to sell USD 5 billion to banks in exchange of rupees, through this auction on March 10, 2022. On March 11, 2024, it will make a forward purchase from banks in two years. The forward purchase will help in reducing RBI’s current foreign exchange reserves and increase its two-year forward USD purchases.
What is a swap auction?
- Under the swap auction, a bank sells US dollars to the RBI. It is also agreed to buy the same amount of US dollars at the end of the swap period. It is different from Open Market Operations (OMOs), materially.
- Under OMOs, the central bank buys and sells government securities in the open market. While in swap transactions only authorised dealers are allowed to deposit US dollars in exchange for rupees.
- Swap Auction is done with the objective of meeting the durable liquidity needs of the system. It injects rupee liquidity for a longer duration by means of long-term foreign exchange Buy/Sell swap. Swap Auction helps in bridging the liquidity deficit.
Centre Hikes MSP on Jute, Promises 66.8%...
Policybazaar.ae Introduces 'PB Advantage...
List of Important Days in January 2025, ...
