RBI Announces $10 Billion USD/INR Buy-Sell Swap to Stabilize Rupee Forward Premiums
The Reserve Bank of India (RBI) announced a 3-year $10 billion USD/INR buy-sell swap program to address a surge in dollar liquidity and stabilize rupee forward premiums that had reached multi-year peaks. The intervention, executed through state-run banks and scheduled for next month, aims to ease tight banking system liquidity conditions driven by year-end balance sheet constraints. Forward premiums eased sharply following the announcement, with January month-end contracts falling from 58 paisa to 41 paisa on Wednesday.
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The Reserve Bank of India (RBI) has announced a 3-year $10 billion USD/INR buy-sell swap program to manage excess dollar liquidity and stabilize rupee forward premiums that had surged to multi-year peaks, the central bank said in a post-market announcement on Tuesday.
The swap, scheduled for next month and executed through state-run banks, represents a direct response to tight liquidity conditions in the banking system exacerbated by year-end balance sheet constraints. Forward premiums had spiked sharply due to a glut of dollar liquidity, with January month-end contracts reaching 58 paisa—a multi-year high—before the announcement.
