RBI brings new tool for Liquidity management- USD/INR Buy/Sell Swap auction

The Reserve Bank of India has announced that to inject Rupee liquidity for longer duration into Indian economy it will launch a new liquidity management toolkit on March 26, 2019. The tool is USD/INR Buy/Sell swap auction that will take place on March 26, 2019.
Under this scheme, the bank (commercial banks) will sell US Dollars to the Reserve Bank of India, and Reserve Bank of India will in return credit the bank with equivalent Rupee funds. In this way, liquidity of Rupee will increase in the system.
The tenor of the Buy/Sell swap auction is 3 years. RBI will buy USD 5 billion under this auction.
After 3 years, Banks will return the Rupee funds will to the Reserve Bank along with the swap premium to get the US Dollars back.
Minimum bid by the Banks: USD 25 million and in multiples of USD 1 million thereafter.

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