RBI to suck out $5 billion liquidity from the system ahead of LIC IPO

Foreign exchange players said the move is positive for rupee and will push up dollar/rupee forward premium

The Reserve Bank of India (RBI) has announced a dollar–rupee two-year sell-buy swap auction for $5 billion on March 8, which will suck out rupee liquidity from the system.

The swap will be in the nature of a simple sell/buy foreign exchange from the RBI side, in which a bank will buy US dollars from the central bank and simultaneously agree to sell the same amount of US dollars at the end of the swap period.

“With a view to elongating the maturity profile of its forward book and smoothen the receivables relating to forward assets, it has been decided to undertake