Mumbai: The Reserve Bank has said it will inject long-term liquidity worth USD 5 billion into the system through foreign exchange swap arrangement with banks for tenor of 3 years on March 26.
“In order to meet the durable liquidity needs of the system, the Reserve Bank has decided to augment its liquidity management toolkit and inject Rupee liquidity for longer duration through long-term foreign exchange Buy/Sell swap in terms of its extant Liquidity Management Framework. The US Dollar amount mobilized through this auction would also reflect in RBI’s foreign exchange reserves for the tenor of the swap while also reflecting in RBI’s forward liabilities,” RBI said in a release.
The swap will be in the nature of a simple buy/sell foreign exchange swap from the Reserve Bank side. A bank shall sell US Dollars to the Reserve Bank and simultaneously agree to buy the same amount of US Dollars at the end of the swap period, RBI said.
Under the swap auction, minimum bid size would be USD 25 million and in multiples of USD 1 million thereafter.
RBI said that the eligible participants are allowed to submit multiple bids. However, the aggregate amount of bids submitted by single eligible entity should not exceed the notified amount of auction.
The banks would be exempted from the ISDA requirements for the purpose of these swaps.