India central bank likely deploys FX swaps to mop up overseas deposit-driven liquidity, traders say
MUMBAI: The Reserve Bank of India is likely conducted near-maturity dollar/rupee sell-buy swaps, as part of its recent efforts to absorb surplus rupee liquidity stemming from overseas deposits raised by lenders, seven bankers said. The central bank is conducting the swaps with a maturity in September, four of the bankers and two FX brokers said, while two of the banker sources also said it was…
The Reserve Bank of India (RBI) is reportedly using foreign exchange (FX) swaps to absorb excess liquidity from overseas deposits raised by Indian banks, according to seven bankers and two foreign exchange (FX) brokers. The central bank plans to conduct near-maturity dollar/rupee swaps with maturities in September and October, with traders noting that forward premiums for these maturities have risen.
The RBI seeks to drain approximately 7 trillion rupees ($147.26 billion-$157.78 billion) through VRRR operations and FX swaps, which will help mitigate liquidity overhang caused by Indian banks' large FX risk exposure on overseas deposits.
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