RBI to conduct USD/INR swap auction of USD 5 bn on Friday to inject liquidity

Mumbai, Jan 28 (PTI) As part of its over Rs 1.5 lakh crore liquidity injection into the banking system, the Reserve Bank on Tuesday said it will conduct a USD/INR buy-sell swap auction of USD 5 billion (about Rs 43,000 crore) on January 31.

The RBI had announced open market operations (OMO) purchase auctions of government bonds aggregating Rs 60,000 crore, Variable Rate Repo (VRR) auction of Rs 50,000 crore and foreign exchange swap of USD 5 billion.

The decision on liquidity injections comes days ahead of RBI's next bi-monthly monetary policy in which the Monetary Policy Committee may opt for a reduction in the benchmark lending rate.

"The Reserve Bank will be conducting a USD/INR Buy/Sell swap auction of USD 5 billion for a tenor of 6 months" on January 31, the central bank said in a statement on Tuesday.

The swap is in the nature of a simple buy/sell foreign exchange swap from the Reserve Bank side.

A bank shall sell US dollars to the Reserve Bank and simultaneously agree to buy the same amount of US dollars at the end of the swap period.

"Under the swap auction, minimum bid size would be USD 10 million and in multiples of USD 1 million thereafter. The eligible participants are allowed to submit multiple bids. However, the aggregate amount of bids submitted by single eligible entity should not exceed the notified amount of auction," it said.

OMO purchase auctions of Government of India securities for an aggregate amount of Rs 60,000 crore in three tranches of Rs 20,000 crore each will be held on January 30, 2025, February 13, 2025, and February 20, 2025.

The 56-day Variable Rate Repo (VRR) auction for a notified amount of Rs 50,000 crore will be held on February 7, 2025.

The RBI's proposed measures on liquidity had a positive impact on the stock market on Tuesday, though the rupee depreciated 26 paise to close at 86.57 against the US dollar. PTI NKD HVA

Source: PTI