The Reserve Bank of India (RBI) on Thursday announced that it will undertake a six-month US Dollar sell/buy swaps to provide liquidity to the foreign exchange market. The decision has been taken as markets worldwide face intense selling pressures on extreme risk aversion due to the spread of Coronavirus.
The first sell/buy swap auction involving $2 billion will be held on Monday, the central bank said.
The RBI in a statement said that the swaps will be conducted through auctions in several tranches. The announcement comes in the backdrop of the rupee crashing to 74.34 against the US dollar, close to its all-time low of 74.48 in October 2018.
Assuring that the RBI is monitoring the situation, the central bank said, "The RBI stands ready to take all necessary measures to ensure that the effects of the COVID-19 pandemic on the Indian economy are mitigated, and financial markets and institutions in India continue to function normally."
According to the market data, foreign investors have withdrawn more than Rs 21,000 crore this month from Indian capital markets so far amid growing concerns over the virus hitting the global economy. "The level of forex reserves at $487.24 billion as on March 6, 2020, remains comfortable to meet any exigency," the bank noted.