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Informist, Wednesday, Sept. 9, 2026

 

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--Dealers: RBI likely conducts dlr-rupee sell-buy swaps in near-term tenures 
--Dealers: RBI likely buying fwd dollars to drain excess rupee liquidity 
--Dealers: Fwd premiums sharply up as RBI likely holds FX sell-buy swaps 
--1-year dollar/rupee forward premium at 3.14% vs 3.05% Tue 
--1-month dollar/rupee forward premium at 2.59% vs 2.30% Tue 

 

By Divya Moolayattil

 

MUMBAI – The Reserve Bank of India likely conducted dollar-rupee sell-buy swaps Wednesday to absorb surplus rupee liquidity from the banking system, six foreign exchange market dealers said. A few dealers said the central bank may have purchased forward dollars worth around $1 billion-$2 billion in one- and two-month tenures.

 

Following the action, the one-month forward premium shot up to 2.61% at close Wednesday from 2.30% Tuesday. The two-month swap rate also rose 28 basis points to 2.91% Wednesday. The benchmark one-year dollar-rupee forward premium rose to 3.16% from 3.05% the previous day.

 

Under the sell-buy swap, the RBI sells dollars for immediate delivery and simultaneously buys them for delivery at maturity, thereby absorbing rupee liquidity from the banking system. The move comes as surplus liquidity in the banking system Sunday rose to a record high since the RBI began maintaining the data in January 2019. 

 

From that record high of over INR 11 trillion, the RBI's net liquidity absorbed was INR 10.49 trillion Tuesday as foreign currency non-resident (banks) deposits mobilised under the central bank's concessional swap window added to systemic liquidity. Total FCNR(B) deposits under the scheme were a higher-than-expected $127.23 billion.

 

The RBI's dollar-rupee sell-buy swap in the secondary market came as a surprise to most traders as the RBI had already been conducting variable rate reverse repo auctions. However, they now expect the central bank to continue with similar swaps in the coming weeks, with limited options in its kitty to manage surplus liquidity in the banking system.

 

"The swap was an unexpected move by the RBI. They don't have many options left, so I expect it to continue with swaps of similar tenures," a dealer at a foreign bank said. Dealers expect the one-year dollar-rupee forward premiums to rise by more than 15 bps if the RBI continues to conduct more sell-buy swaps.

 

The RBI has been conducting variable rate reverse repo auctions almost daily for the past five weeks to absorb excess liquidity from the banking system. Wednesday, it accepted all bids worth INR 4.62 trillion at its overnight VRRR auction, against a notified amount of INR 5.00 trillion. Participation increased from previous auctions amid the persistent surplus liquidity, but the auction was still undersubscribed.

 

"The RBI likely absorbed around INR 3 trillion through the (long-term) VRRR operations. There is still around INR 7 trillion of surplus liquidity in the system. Of this, INR 2 trillion-INR 3 trillion could be absorbed during the festive season, but the remaining INR 4 trillion-INR 5 trillion may persist as surplus liquidity. The RBI could therefore use measures such as sell-buy swaps to manage the excess," another dealer said.  End

 

US$1 = INR 95.10

Edited by Rajeev Pai

 

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