Daijiworld Media Network - Mumbai

Mumbai, May 20: The Reserve Bank of India (Reserve Bank of India) on Wednesday announced a USD/INR buy-sell swap auction worth $5 billion, scheduled for May 26, as part of its measures to manage liquidity conditions in the banking system.

The central bank said the operation will be conducted for a three-year tenor, with the spot settlement (near-leg) date fixed for May 29, 2026, and the maturity (far-leg) date set for May 29, 2029. The auction will take place between 10:30 a.m. and 11:30 a.m.

According to the RBI, the decision follows a review of evolving liquidity conditions in the financial system, with the aim of ensuring adequate rupee liquidity while maintaining foreign exchange stability.

Under the swap mechanism, banks will sell US dollars to the RBI and agree to repurchase the same amount at the end of the tenure. This structure allows the central bank to inject rupee liquidity into the system while managing its forex position.

The auction will be conducted through a multiple price-based format, where participating banks will bid the premium they are willing to pay in paisa terms. Bids will be arranged in descending order, and the cut-off will be determined based on the notified auction size of $5 billion.

Only Authorised Dealer Category-I banks will be eligible to participate, with a minimum bid size of $10 million and subsequent bids in multiples of $1 million. Banks may submit multiple bids, subject to the overall auction limit per participant.

In the first leg of the transaction, dollars will be sold to the RBI at the FBIL reference rate prevailing on the auction date, while rupee liquidity will be credited to banks’ current accounts. The US dollars will be transferred to the central bank’s designated account.

At maturity, participating banks will return the rupee funds along with the agreed premium and receive US dollars back from the RBI, completing the swap cycle.