RBI's rupee-dollar swap auction to ease liquidity gets a big thumbs up

The idea behind the swaps is to infuse rupee liquidity by buying dollars

The Reserve Bank of India (RBI) received an overwhelming response to its dollar swap window on Tuesday, establishing the instrument as a credible liquidity tool and paving the way for more such auctions in the coming months.

Banks offered $16.31 billion for the proposed swaps of up to $5 billion. The RBI accepted $5.02 billion at a cut-off premium of Rs 7.76 for three-year dollars — close to the rate at which the market was trading at.

“Banks had bid to pay such that three-year MIFOR (Mumbai Interbank Forward Offer Rate) would be at 6 per cent. The cut-off of