RBI's USD 5 billion USD/INR swap auction nearly 2x oversubscribed
Mumbai, May 26
The Reserve Bank of India's USD/INR swap auction of USD 5 billion witnessed robust demand from market participants on Tuesday, with the auction getting nearly two times oversubscribed, according to data released by the central bank.
The RBI said that against the notified amount of USD 5 billion, participants placed bids worth USD 9.80 billion, reflecting strong appetite for the liquidity operation. The bid-to-cover ratio stood at 1.96, indicating that bids received were almost double the amount on offer.
The central bank accepted bids amounting to the full notified size of USD 5 billion. A total of 254 bids were received during the auction, out of which 141 bids were accepted.
According to the RBI, the cut-off premium for the auction was fixed at 910 paisa, while the weighted average premium of accepted bids came in at 920.64 paisa. Partial allotment at the cut-off premium was 18.10 per cent of competitive bids.
The first leg of the swap settlement will take place on May 29, 2026, while the second leg settlement has been scheduled for May 29, 2029, implying a three-year tenor for the swap arrangement.
The RBI had announced the auction on May 20 as part of its liquidity management operations. Through the buy/sell swap mechanism, the central bank purchases US dollars from banks in exchange for rupees in the first leg and reverses the transaction at a future date.
Such swap operations help manage durable liquidity conditions in the banking system while also influencing short-term money market rates and foreign exchange liquidity.
The strong response to the auction signals continued demand for rupee liquidity among banks and financial institutions amid evolving domestic and global market conditions. The healthy participation also reflects confidence in the RBI's liquidity management framework and the attractiveness of the swap pricing offered in the auction.
The RBI regularly uses tools such as variable rate repo auctions, reverse repos, open market operations and forex swaps to ensure orderly liquidity conditions in the financial system.
— ANI
Reader Comments
Finally some smart moves by RBI. The cut-off premium at 910 paisa seems reasonable. But why not use this USD directly for infrastructure instead of just banking liquidity? Our rural sector needs real dollars, not just speculative trades. Just saying!
As someone working in forex, this is a textbook move. The 3-year tenor is perfect for managing medium-term liquidity. RBI knows what they're doing - keeping the rupee stable while ensuring banks have enough firepower. 👌
American here living in Mumbai. Nice to see RBI being proactive with liquidity. In US, Fed does similar operations. But 910 paisa cut-off seems slightly aggressive? Let's see how this impacts short-term interest rates going forward.
Honestly, these big bank operations don't really help common people like us. Meanwhile my small business loan application is pending since 3 months. All this liquidity is just for big players. Aur aam aadmi ka kya? 🙄
The bidding being oversubscribed shows banks are confident about rupee stability. Good sign for Indian economy. But I hope RBI also keeps eye on inflation - don't want another 2013 taper tantrum situation! 🇮🇳
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