(Reuters) - The Reserve Bank of India (RBI) said on Monday it would conduct another round of dollar-rupee buy-sell swap of $5 billion for a tenure of three years on April 23, its second such auction within a month.
The new swap auction tool is meant to provide the central bank greater flexibility in managing banking system cash, while helping soak up any potential large dollar inflows that could make the rupee rise sharply.
This comes shortly after the RBI said last month it will conduct a dollar-rupee buy-sell swap auction of $5 billion for a tenure of three years on March 26, the first such market sale by the central bank to mop up dollars and pump in rupees.
In the first round, the central bank set a premium of 7.76 rupees and accepted the entire planned $5 billion on sale.
In 2013, then central bank governor Raghuram Rajan announced a similar forex deposit swap arrangement at a subsidised market rate to attract dollars and prevent the rupee’s free fall during India’s worst currency crisis since 1990s.
Reporting by Chandini Monnappa in Bengaluru, Editing by Sherry Jacob-Phillips