RBI USD/INR swap auction attracts USD 9.80 billion bids; accepts USD 5 billion

The Reserve Bank of India’s USD/INR buy/sell swap auction on Tuesday drew heavy demand. Bids almost doubled the size offered by the central bank. The RBI received USD 9.80 billion in bids. The RBI accepted USD 5 billion at a cut-off premium of 910 paise.

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The notified auction size was USD 5 billion, the RBI said in a release. The auction attracted 254 bids in total. The RBI accepted 144 of these bids. The bid-to-cover ratio was 1.96. The RBI also put the partial allotment at 18.10 per cent.

RBI USD/INR swap auction: dates and settlement process

The swap has two legs, with the first scheduled for May 29. The second leg will take place on May 29, 2029. The second leg will reverse the funds exchanged earlier. This structure sets the timeline for returning rupees and receiving US dollars back.

In the first leg, banks will sell US dollars to the Reserve Bank. The rate will be the FBIL reference rate on the auction date. Settlement will be on a spot basis from the transaction date. The RBI will credit rupee funds to the current account of each successful bidder.

RBI USD/INR swap auction: delivery and reverse leg terms

Successful bidders must deliver US dollars into the RBI’s nostro account. The later leg will require bidders to repay the rupee funds. Bidders must also pay the swap premium at that time. After receiving these amounts, the RBI will return the US dollars to bidders.

RBI USD/INR swap auction: banking system liquidity position

Separate RBI data showed surplus liquidity in the banking system. The surplus was estimated at around Rs 67,285.42 crore. The figure was as on May 25. The auction results and system liquidity together outlined current market conditions for rupee funding.

With inputs from PTI