The swap public sale is a part of the central financial institution’s newest measures (introduced on January 27, 2025) to inject Rupee liquidity aggregating about Rs 1.50 lakh crore into the banking system.
The RBI obtained bids from 253 members aggregating $25.59 billion on the public sale towards the notified quantity of $5 billion. It accepted bids aggregating $5.10 billion (injecting an equal quantity of Rupee liquidity into Banks) at a weighted common premium of 97.72 paise.
Within the first leg of the aforementioned swap transaction, banks bought US {Dollars} to the RBI. The RBI will credit score the Rupee funds to the present accounts of the profitable bidders. Within the reverse leg of the swap transaction, Rupee funds will probably be returned to the RBI together with the swap premium after six months to get the US {Dollars} again.
Harsimran Sahni, EVP – Head Treasury, Anand Rathi World Finance, famous that because the market was already in deficit mode, it was anticipating some motion on Rupee liquidity through OMO (open market operation) purchases of Authorities Securities or USD/ INR Swap.
“So when the liquidity injection measures have been introduced by RBI, the market was already positioned accordingly or it was discounted. Due to this fact, not a lot influence was seen on the USD/INR….If RBI continues additional with long run USD/INR Swap, then rupee will step by step depreciate,” he mentioned.
Sahni famous that the USD/INR swap liquidity injection will ease short-term liquidity within the banking system, thereby resulting in decrease short-term rates of interest throughout the yield curve.
Additional, the extra liquidity is anticipated to carry down short-term authorities bond yields (T-bills and short-term papers). The influence on longer-term papers could also be restricted until the RBI indicators additional liquidity measures or cuts the repo price within the February MPC coverage.
Amit Pabari, MD, CR Foreign exchange Advisors, famous that underneath the swap public sale, the central financial institution bought spot {dollars}, injecting rupee liquidity, whereas it concurrently bought {dollars} within the forwards, neutralizing the influence on the USD/INR pair.
Pabari noticed that the influence of assorted world and home elements, together with the Union Price range for FY26, on the rupee stays unsure.
“Elevated authorities spending might enhance the Rupee provide, resulting in depreciation. Conversely, strategic investments and coverage reforms would possibly entice FII inflows, lending assist to the forex,” he mentioned.
