RBI $10 Billion Dollar-Rupee Swap Auction Explained
Why in the news
RBI ran a dollar-denominated rupee swap auction to inject $10 billion, its second such move within a month, to meet banks’ long-term liquidity needs.
Swap comparison
| Feature | Earlier swap | Latest swap |
|---|---|---|
| Size | $5 billion | $10 billion |
| Date | January 31, 2025 | Within a month of the first |
| Tenor | Six months | Three years |
Key facts
- Combined, the swaps add about ₹1.3 trillion to banks.
- Aims: steady the rupee, ease liquidity and contain inflation.
- Banking liquidity shortfall: ₹1.7 trillion on February 20, 2025; economists say another $5 billion swap may be needed.
Pressures on the economy
- Rupee down 3.3% since October 2024, crossing ₹85 per dollar on December 19, 2024.
- About $31 billion left Indian equities.
- RBI sold roughly $111.2 billion (about 18% of forex reserves).
Significance
- Banks must convert liquidity into credit to support investment, jobs, wages and consumption, helping growth beyond the current 6.4%.
Exam angle
- Instrument: dollar-rupee swap auction.
- Current GDP growth cited: 6.4%.