A U.S. one dollar banknote and Indian ten rupee banknotes are arranged for a photograph in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

India to Repeat $5 Billion Forex Swap After Successful Auction

(Bloomberg) -- India’s central bank will conduct a $5 billion swap auction on April 23 after its success with the instrument last month, it said in a statement on Monday.

The Reserve Bank of India received 240 bids worth $16.31 billion in the rare swap on March 26. The move to buy dollars and offer banks rupees in return helped inject liquidity into Asia’s third-largest economy in time for the surge in demand as the financial year closed on March 31.

While the swap will bulk up India’s foreign-exchange reserves, there’s concern that using the forex swap may reduce the need for the central bank to buy debt from the market. The central bank last bought government bonds from the market on March 14. The RBI bought 3 trillion rupees of bonds last fiscal, supporting the market at a time when concerns about the government’s record $100 billion borrowing plan has cooled demand for debt.

The auction will be held between 9:30 a.m. to 11 a.m. local time, according to the statement on Monday. The instrument has no liability on the RBI unlike in 2013, when the authority subsidized banks on the interest rate they offered to mop up more than $30 billion in deposits from non-resident Indians to salvage the rupee.

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