Sign In
Learn bits
Economy
Mahesh

11/03/22 15:13 PM IST

RBI’s $5 billion dollar-rupee swap

In News 
  • The Reserve Bank of India (RBI) conducted a $ 5 billion dollar-rupee swap auction as part of its liquidity management initiative, leading to infusion of dollars and sucking out of the rupee from the financial system.
  • The central bank’s move will reduce the pressure on inflation and strengthen the rupee.
About Dollar-Rupee Swap Action 
  • It’s a forex tool whereby the central bank uses its currency to buy another currency or vice versa.
  • In a Dollar–Rupee buy/sell swap, the central bank buys dollars (US dollars or USD) from banks in exchange for Indian Rupees (INR) and immediately gets into an opposite deal with banks promising to sell dollars at a later date.
Impact of Swap 

  • Forex swaps are intended for liquidity management. Therefore, their impact on currency is only incidental.
  • The RBI resorting to selling USD in two tranches will keep a check on Rupee’s volatility and help curb its depreciation to some extent.
  • For the bond market, the exercise may have a pronounced impact.
Why this Swap needed? 

  • Forex swaps help in liquidity management.
  • It also, in a limited way, helps in keeping the currency rates in check.
  • A dollar–rupee buy/sell swap injects INR into the banking system while sucking out the dollars, and the reverse happens in a sell/buy swap.
Source- Indian Express 

    More Related Current Affairs View All

    09 Aug

    Cabinet approves continuation of Targeted Subsidy for Pradhan Mantri Ujjwala Yojana Consumers

    'The government has approved the continuation of targeted subsidies for Pradhan Mantri Ujjwala Yojana consumers for the year 2025-26 with the estimated cost of over 12 thousand cro

    Read More

    09 Aug

    Cabinet approves Budgetary Support for Multidisciplinary Education and Research improvement in Technical Education (MERITE) Scheme

    'The Union Cabinet has approved a proposal to implement the Multidisciplinary Education and Research Improvement in Technical Education (MERITE) scheme in 275 institutions across t

    Read More

    09 Aug

    Aircraft Accident Investigation Bureau (AAIB)

    ' A month after the deadly Air India flight crash in Ahmedabad, where 241 of the 242 people onboard flight AI 171 died, the Aircraft Accident Investigation Bureau (AAIB) released a

    Read More

    India’s First Ai-Driven Magazine Generator

    Generate Your Custom Current Affairs Magazine using our AI in just 3 steps