$5 bn swap smartest move of RBI gov

The new instrument could be a permanent fixture in the RBI's liquid management toolkit, the level of the rupee determining the frequency of use

India’s banking regulator’s decision to hold a $5 billion three-year US$/Indian rupee buy/sell swap auction (on March 26) is driving forward premia down, paring the hedging cost of corporations for their overseas borrowings. 
 

This is one of the many outcomes of the Reserve Bank of India’s (RBI) latest liquidity infusion move through a unique instrument. Indeed, in the past too, the RBI had infused rupee liquidity using this route but that had been done (last time in 2013) in difficult times, when the local currency was under attack. 

This diversifies the liquidity management toolkit of the RBI. A cut in the