RBI’s forex blitz drains nearly $20 billion from surplus liquidity, bankers say
The central bank’s sell/buy swaps have pushed dollar-rupee forward premiums higher, raising the cost of hedging dollar exposure, with the one-year premium up around 50 basis points this month
The Reserve Bank of India (RBI) has significantly reduced excess rupee liquidity by an estimated $20 billion through foreign exchange operations, according to two bankers. The measures include dollar-rupee sell-buy swaps, spot dollar sales, bond sales, and variable-rate reverse repos. This decline in liquidity surplus, which fell from a record ₹11.16 lakh crore ($116.10 billion) to ₹11.5 lakh crore, is evident in core liquidity levels.
Gaura Sengupta, Chief Economist at IDFC First Bank, estimates that another ₹1.5 lakh crore may be removed via bond sales and sell-buy FX swaps. Economists note that the nearly $20 billion drained through FX operations represents the net impact, with actual dollar sales likely higher. The RBI's use of FX swaps as a liquidity tool is becoming increasingly important.
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