RBI conducts dlr-rupee sell-buy swap for 2nd day to drain surplus liquidity
This story was originally published at 14:12 IST on 10 September 2026
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--Dealers: RBI likely conducts dlr-rupee sell-buy swaps in near-term tenures
--Dealers: RBI likely buying fwd dollars to drain excess rupee liquidity
--Dealers: Fwd premiums sharply up on likely RBI FX sell-buy swaps
--Dollar/rupee 1-month forward premium up at 3.26% vs 2.61% Wed
--Dollar/rupee 1-year forward premium up at 3.35% vs 3.16% Wed
MUMBAI – The Reserve Bank of India is likely to have conducted dollar-rupee sell-buy swaps in the foreign exchange market for the second straight day on Thursday in order to drain surplus rupee liquidity from the banking system, five foreign exchange market dealers said. The central bank likely bought forward dollars in one- and two-month tenures, similar to Wednesday, they said.
"After yesterday's swap, it was already anticipated that more similar swaps would happen. Liquidity is still there; it hasn't changed much, so the RBI continues to increase the size of VRRR auctions and is simultaneously conducting sell-buy swaps. They don't have many options left," a dealer at a private sector bank said.
Following the swaps, the one-month and two-month dollar-rupee forward premiums surged 58 basis points to 3.19% and 46 basis points to 3.36%, respectively, Thursday.
Under a sell-buy swap, the RBI sells dollars for immediate delivery and simultaneously buys them for delivery at maturity, thereby absorbing rupee liquidity from the banking system. The move comes as surplus liquidity in the banking system surged to its highest level since the RBI started maintaining records of the metric in January 2019.
Surplus liquidity stood at INR 10.50 trillion on Wednesday, little changed from INR 10.49 trillion a day earlier, as strong inflows mobilised through the central bank's FCNR(B) swap scheme added to systemic liquidity. Total FCNR(B) deposits under the scheme stood at a higher than expected $127.23 billion.
The RBI has also been conducting variable rate reverse repo auctions to absorb surplus liquidity from the banking system. The central bank conducted an overnight VRRR auction for INR 6.00 trillion Thursday and accepted all offers worth INR 3.97 trillion. End
US$1 = INR 95.38
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Reported by Divya Moolayattil
Edited by Avishek Dutta
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