India central bank delivers maturing $5 billion dollar-rupee swap, bankers say

Business Recorder

04-08-2025

MUMBAI: The Reserve Bank of India will deliver a $5 billion dollar-rupee swap maturing on Monday, with surplus rupee liquidity in the banking system leaving little need for a rollover, four bankers said.
Delivering the swap without a rollover implies the RBI is selling dollars and absorbing rupees from the banking system — a move unlikely to disrupt money markets, with rupee liquidity currently in surplus, bankers said, requesting anonymity since they are not authorized to speak to the media.
The $5 billion buy-sell dollar/rupee six-month swap, which matures on Monday, was part of a series of measures that the central bank had taken to boost rupee liquidity from late January to May.
'The purpose of the swap was to inject INR liquidity,' a senior treasury official at a state-run lender said. At the time of initiating the swap in January, the central bank bought dollars, injecting rupees into the banking system.
'Now with the system running a surplus, settling it won't cause any disruption — and that provides RBI room to deliver it.'
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India's banking system liquidity surplus has risen to over 3.60 trillion Indian rupees ($41.2 billion) — the highest in four weeks and equivalent to around 1.5% of total deposits. RBI head Sanjay Malhotra had indicated in April that the central bank is looking at keeping surplus levels around 1% of deposits.
'The central bank will not roll over the swap,' said VRC Reddy, treasury head at Karur Vysya Bank, 'At this juncture, rupee liquidity is very comfortable, and it makes sense for the central bank to deliver the dollars.'
Further, a swap trader at a mid-sized private sector bank said he had not seen or heard of any large-sized buy/sell swaps being conducted through state-run banks — a development that would typically accompany a rollover by the RBI.
Dollar-rupee near-term swaps showed no signs of disruption from the maturity of the RBI's swap. The cash-tomorrow swap was quoted at 0.34/0.35 paisa, implying an annualised yield of around 5.8% — only marginally above the interbank call rate.