The Reserve Bank of India has executed more than $2 billion in currency swaps over the past two days to offset the liquidity squeeze from selling spot dollars, four bankers said. This suggests a focus on limiting currency pressures without exacerbating banks’ liquidity constraints.
The central bank has intensified intervention in the spot market as equity outflows, higher demand linked to bullion imports and increased hedging add to pressure on the rupee. The currency fell 0.8% to an all-time low of 91.7425 on Wednesday.
Spot intervention drains liquidity from the rupee, an effect that the RBI can counter through dollar/rupee buy-sell FX swaps, with the first leg settled on the spot date and the second on a future date.
Bankers said the central bank carried out such swaps over different maturities on Tuesday and Wednesday. Although opinions varied on the total size, one banker estimated it at more than $3 billion, with estimates starting at around $2 billion.
The bankers requested anonymity because they were not authorized to speak publicly. The RBI did not immediately respond to an emailed request for comment.
While the RBI regularly uses FX swaps in addition to spot intervention, bankers said the volume of buy-sell swaps was unusually high this week compared to previous periods.
“It looks like they (RBI) will have to do this (the buy-sell swaps) regularly, given how often they have to intervene (on the ground) and the liquidity crunch,” said a senior finance ministry official at a private sector bank.
Liquidity in the Indian banking system has been in short supply at times in recent weeks, despite the central bank’s bond purchases and currency swap operations. Bankers said cash conditions have come under increasing pressure from spot FX interventions.
The banking system’s liquidity fell into a deficit of around ₹6,000 crore ($655.4 million) on Wednesday.
The RBI’s swap lowered the dollar/rupee hedging cost, countering the upward pressure on forward premiums that would normally accompany a currency decline.
The implied yield on the one-year dollar/rupee premium fell by around 10 basis points over the past two days and fell further on Thursday.
Published on January 22, 2026
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