News

RBI Infuses USD 5.1 Billion Liquidity Through FX Swap Auction.

Banking & Finance | Dated: 04 Feb 2025

In January 2025, the Mumbai (Maharashtra)-based Reserve Bank of India (RBI) conducted a dollar-rupee buy/sell FX swap auction for USD 5.1 billion. The auction witnessed significant oversubscription, with total bids reaching USD 25.59 billion from 253 participants, surpassing the offered amount by five times.

🎯 Key Highlights:

- This initiative aims to infuse rupee liquidity into the banking system and aligns with the central bank’s broader strategy to inject approximately Rs. 1.5 trillion into the financial system.

💡 Other Important Facts:

(i) The transaction will be reversed on August 4, 2025, when the RBI will sell the USD 5.1 billion—acquired through 28 accepted bids—back to the market at the forward rate (currency exchange spot rate plus 96.71 paise) and absorb approximately Rs. 43,784 crores.
(ii) Following the auction results, dollar-rupee forward premiums experienced a slight decline, with the 1-year implied yield moderating its rise to settle at the last quoted rate of 2.24%.
(iii) In an FX swap, the RBI purchases dollars from financial institutions in exchange for rupees, simultaneously increasing rupee liquidity and reducing excess dollar circulation.

📚 Test Your Knowledge:

What was the total amount of liquidity infusion by RBI in its recent FX swap auction?

Correct Answer: USD 5.1 billion

🚀 Quick Recap:

About RBI

Governor : Sanjay Malhotra
Headquarter : Mumbai