The Reserve Bank of India’s (RBI) $10 billion, 3-year dollar/rupee buy-sell swap auction on Monday to boost rupee liquidity was oversubscribed by a little over two times, with the cutoff rate set at 5.86 rupees.
Under the swap, the central bank will inject liquidity amounting to $10.04 billion equivalent of rupees into the banking system on Wednesday. The transaction will be reversed in three years.
The swap is part of series of measures that the RBI has taken to ease a liquidity crunch in the banking system. The liquidity deficit stood at about 2 trillion rupees ($23.27 billion) last Friday.
The central bank injected about $64 billion worth of rupee liquidity into the system through open market bond purchases, longer-tenor repo operations, and FX swaps, before Monday’s auction.
The RBI set the swap’s cutoff premium at 5.86 rupees, lower than the 6.55 rupees set for a similar-sized and duration auction held late last month.
The weighted average premium of the bids accepted was 5.92 rupees, it said, compared to 6.73 rupees in the previous auction.
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