MUMBAI — The Reserve Bank of India said Wednesday it will conduct a $5 billion dollar-rupee buy-sell swap auction on May 26 to inject liquidity into the banking system.
The central bank said the auction will have a three-year tenor and will be held from 10:30 a.m. to 11:30 a.m. The spot settlement date has been set for May 29, 2026, while the maturity date will be May 29, 2029.
The RBI said the decision followed a review of current and evolving liquidity conditions in the financial system.
Under the swap arrangement, banks will sell U.S. dollars to the RBI and agree to buy back the same amount at the end of the swap period. The structure allows the central bank to provide rupee liquidity to the banking system while managing its foreign exchange reserves.
The auction will be conducted through a multiple price-based format, meaning successful bidders will receive swaps at the premium quoted by them.
Banks must submit bids based on the premium they are willing to pay to the RBI, expressed in paisa terms up to two decimal places.
After the auction window closes, bids will be arranged in descending order of quoted premiums. The RBI will determine the cut-off premium based on the notified auction amount, and bids below that level will be rejected.
Only Authorised Dealers Category-I banks will be allowed to participate. The minimum bid size is $10 million, with additional bids allowed in multiples of $1 million.
Banks may submit multiple bids, but the total amount bid by any single participant cannot exceed the notified auction size.
In the first leg of the transaction, banks will sell dollars to the RBI at the Financial Benchmarks India Pvt. Ltd. reference rate on the auction date. The RBI will credit rupee funds to successful bidders’ current accounts, while banks will deliver dollars to the central bank’s designated account.
At the end of the swap tenure, participating banks will return the rupee liquidity along with the agreed premium and receive back the U.S. dollars. (Source: IANS)
