The Reserve Bank of India (RBI) said the redemption of the Resurgent India Bonds (RIBs) on October 1 will not impact the foreign exchange market or the rupee liquidity in the banking system.
A RBI release said the central bank has put in place the right mechanism to ensure the smooth redemption of RIBs in close consultation with the State Bank of India (SBI) which floated the instrument in 1998.
The RBI said the foreign currency required by SBI for redemption will be sold by the central bank at the prevailing market rates on the date of maturity. The total amount of bonds to be redeemed, inclusive of interest, will be around $5.5 billion.
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The RBI has already built up a $4.2 billion chest of forward foreign currency assets. It will sell foreign currency to SBI out of the forward foreign currency assets that will fall due around the date of redemption, the RBI release said.