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14-Mar2019

RBI to inject long-term liquidity worth $5 billion into system

In order to meet the durable liquidity needs of the system, the Reserve Bank of India (RBI) has decided to inject long-term liquidity worth $5 billion into the system through foreign exchange swap arrangement with banks for three years. The swap will be in the nature of a simple buy/sell foreign exchange swap from the RBI side.

Under the swap, a bank would sell US dollars to the RBI and simultaneously agree to buy the same amount of US dollars at the end of the swap period. The US Dollar amount mobilised through the auction, to be conducted on March 26, would also reflect in RBI's foreign exchange reserves for the tenor of the swap while also reflecting in RBI's forward liabilities.

The Central Bank said the market participants would be required to place their bids in terms of the premium that they are willing to pay to the RBI for the tenor of the swap, expressed in paisa terms up to two decimal places. Under the swap auction, minimum bid size would be $25 million and in multiples of $1 million thereafter.


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