RBI takes delivery of $5 billion dollar/rupee swap: Report

RBI swap maturity update: The Reserve Bank of India (RBI), on Monday, declined to roll over a $5 billion dollar/rupee swap that matured, news agency Reuters reported quoting four bankers familiar with the matter. The move was aimed at bolstering foreign exchange reserves and rupee liquidity.

The dollar/rupee sell-buy swap, conducted by the RBI in March 2022, reached maturity on Monday. The central bank had several options: it could take delivery of the swap, roll it over entirely, or opt for a partial rollover. According to banking sources mentioned in the Reuters report, the RBI chose to take delivery, effectively removing $5 billion from the system and injecting liquidity proportionately.

"In all likelihood, it seems that the RBI has taken delivery of the swap," said Ritesh Bhusari, joint general manager for treasury at South Indian Bank.

Traders anticipate significant tax outflows around March 15 due to advance tax payments, followed by GST outflows around March 20, estimated to total approximately Rs 2.5 lakh crore ($30.23 billion).

"RBI likely took delivery. It ticks off two boxes - forex reserves and rupee liquidity," Dhiraj Nim, forex strategist at ANZ, said. He pointed out that dollar liquidity is not currently a concern as inflows are healthy, while rupee liquidity remains tight.

If the reports are accurate, the RBI's decision to take delivery of the swap will further bolster India's forex reserves, already at a two-year high of $625.6 billion as of March 1, according to data from the central bank. The full impact of the swap maturity on reserves will be reflected in data to be released on March 22.

However, a senior treasury official at a private bank cautioned that the change in reserves resulting from the swap delivery might not precisely match the $5 billion amount. The official explained that the RBI had supplied dollars last Thursday and on Monday through spot over March swaps, which would affect headline reserves.

(With Reuters inputs.)