In a buy-sell swap, the RBI buys dollars from financial institutions in exchange for rupees, thus injecting liquidity into the system.
”In the second leg of the transaction in August, the RBI will sell back the $5 billion to the market at the forward rate (currency exchange spot rate plus 96.71 paise) and take back Rs 43,784 crores approximately,” said Anil Bhansali, head of treasury at Finrex Treasury Advisors.
Dealers expect liquidity to be comfortable by August as government spending will commence once the budget is announced on February 1.
The RBI also conducted screen-based open market operation (OMO) purchases worth Rs 20,000 crore in the week ended January 24 to further ease liquidity. This operation is worth double the amount of purchases done in the week ended January 17, where the RBI did OMO purchases of Rs 10,175 crore.
Liquidity has persistently been in deficit mode since mid-December and was in a deficit of Rs 2.22 lakh crore as of January 30. Daily average liquidity gap in January stood at Rs 2.04 lakh crore.Separately, money market participants saw a major devolvement on primary dealers (PD) in the green bond auction on Friday, where PDs had to buy Rs 3,945.5 crore of green bonds in an auction where the notified amount was Rs 5,000 crores.“Why would I buy a green bond when I do not have the mandate for it?” asked a senior fund manager at a private bank.
The RBI received bids worth Rs 7718.8 crore, but accepted only Rs 1053.8 crore, as the price at which bids were made would not have been comfortable, the dealer said.
The rupee closed at 86.6 per dollar on Friday, versus its previous close of 86.62 per dollar, hurt by portfolio outflows, expectations of a rate cut and uncertainties in US policies over tariffs, dealers said.
