The Reserve Bank of India announced a $5 billion USD/INR buy-sell swap auction scheduled for May 26 to inject liquidity into the banking system. The auction, set for a three-year tenor, will occur between 10:30 a.m. and 11:30 a.m. on May 26. The near-leg or spot settlement date is May 29, 2026, with the far-leg maturity date on May 29, 2029.
The RBI’s decision stems from a review of current liquidity conditions in the financial system. Under the swap arrangement, banks will sell US dollars to the RBI and commit to repurchase the same amount at the swap tenure’s end. This mechanism aids in infusing rupee liquidity into the banking system while managing foreign exchange reserves.
The auction will employ a multiple price-based format, with successful bidders receiving swaps at the premium they quote. Market participants must submit bids indicating the premium they are willing to pay to the RBI in paisa terms up to two decimal places. Bids will be organized in descending order of quoted premiums post-auction, with a cut-off premium determined based on the auction amount.
Authorized Dealers Category-I banks are eligible to participate, with a minimum bid size set at $10 million and subsequent bids in $1 million increments. Banks can submit multiple bids, provided the total bid amount from a single participant does not exceed the auction size. In the initial transaction leg, banks will sell dollars to the RBI at the prevailing FBIL reference rate on the auction date.
At the swap tenure’s conclusion, participating banks will return rupee liquidity with the agreed premium to receive back the US dollars.
