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RBI's $5B Swap Draws Huge Demand
16 Dec
Summary
- RBI's 3-year dollar/rupee swap saw bids over twice the $5 billion size.
- The operation injects $16 billion into the banking system.
- Auction accepted 118 bids with a premium cut-off of 7.65 rupees.
The Reserve Bank of India's (RBI) three-year dollar/rupee buy-sell swap auction experienced robust demand, drawing bids that more than doubled the $5 billion size. This significant financial operation is integral to a broader $16 billion liquidity injection into the Indian banking system.
The primary objective of this liquidity boost is to enhance the effectiveness of interest rate cuts, encouraging their transmission to actual lending rates. The RBI has been actively increasing liquidity, aligning with its recent 25-basis-point rate cut earlier this month, part of a larger 125-basis-point reduction this year.
The auction concluded with the acceptance of 118 bids, establishing a premium cut-off rate of 7.65 rupees. This initiative is expected to provide substantial support to the banking sector, ensuring financial stability and facilitating economic growth.
