MUMBAI: The Reserve Bank of India received a total of 255 bids offering $18.65 billion in the second of its US dollar-rupee swap auctions conducted on Tuesday in a new measure the central bank came up with last month to inject durable liquidity in the system. The cut-off premium was at Rs 8.38 for the three-year buy-sell swap. RBI accepted 5 offers for $5 billion injecting rupee liquidity of Rs 34,874 crore in the system.
“That means RBI is going to use this as appropriate tool in the present context. Right now liquidity is tight, and tighter than what RBI had anticipated. Elections has caused a big impact. After the FMP issue, money is not coming into FMPS debt funds are also reluctant to invest in the bonds of NBFCs,” said Dr VK Vijayakumar, Chief Investment Strategist, Geojit.
Tuesday’s auctions showed easy dollar liquidity in the system as the number of bids, amount offered, as well as the cut-offs were higher than the first auction. The cut-off in the first auction was at Rs 7.76 and the swap injected liquidity of Rs 34,561 crore. NBFCs and Indian firms have been raising money through external commercial borrowing even as domestic rupee liquidity has been difficult to balance since the credit events in September last year.
However, the RBI hasn’t paused on the traditional OMOs (open market operations).