Indian central bank’s $10 billion FX swap subscribed three times over

MUMBAI: The Reserve Bank of India’s (RBI) 3-year dollar/rupee buy-sell swap drew strong demand on Tuesday, with the auction drawing bids a little under three times the $10 billion size.

The central bank accepted 42 bids at the FX swap auction with the premium cut-off set at 7.28 Indian rupees. A total of 348 bids worth $29.94 billion were received.

Bankers had expected robust demand as corporates sought to lock in hedges on overseas borrowings and take advantage of an attractive gap between onshore and offshore swap rates.

The settlement of the initial leg of the FX swap will take place on Friday, through which the RBI will inject rupee liquidity into the banking system. The transaction will be reversed three years later.

RBI’s $10 billion FX swap to sail through on arbitrage, corporate demand, bankers say

The swap is part of the central bank’s measures to inject $32 billion of rupee liquidity into the banking system, aimed at boosting the transmission of rate cuts.

Despite the Reserve Bank of India cutting policy rates by a cumulative 125 basis points in 2025, the yield on India’s 10-year government bond declined by only 17 basis points in that period.

The RBI under chief Sanjay Malhotra has been aggressive on injecting liquidity, though some of the infusions have been blunted by FX intervention to support the rupee, Asia’s worst-performing currency last year.