RBI Announces 36-Month USD/INR Swap Auction of $5 Billion to Enhance Banking System Liquidity

The Reserve Bank of India has announced plans to conduct a long-term USD/INR Buy/Sell Swap auction aimed at injecting liquidity into the banking system. This strategic move comes at a time when financial conditions require additional support through liquidity management.

According to the RBI's Monday press release, the central bank will execute a 36-month swap auction of USD 5 billion on December 16, 2025. This initiative represents an important step in the RBI's broader liquidity management strategy.

For this auction, participants must submit bids specifying the premium they are willing to pay to the RBI for the entire three-year tenor. The premium needs to be quoted in paisa terms with precision up to two decimal places. Following a multiple-price format, the auction's cut-off will be established based on the received premiums, with successful bids being accepted at the exact quoted premium.

The swap's near leg (spot date) has been scheduled for December 18, 2025, while the far leg, when the swap concludes, will occur on December 18, 2028.

This swap operation constitutes part of a comprehensive liquidity plan for December 2025. Last Friday, after evaluating current financial conditions, the RBI announced several measures to maintain orderly liquidity. These include two Open Market Operation (OMO) purchase auctions of Government of India securities totaling Rs 1,00,000 crore, divided into two equal tranches of Rs 50,000 crore each, scheduled for December 11 and December 18. The USD/INR swap on December 16 forms the second component of this liquidity enhancement strategy.

The RBI has indicated that detailed instructions for each operation will be issued separately to ensure clarity in the bidding process for all participants.

In its Friday press release, the RBI affirmed its commitment to continuously monitor evolving liquidity and market conditions, pledging to implement appropriate measures as needed to maintain orderly liquidity conditions in the financial system.