{"id":116364,"date":"2019-03-27T03:41:42","date_gmt":"2019-03-27T03:41:42","guid":{"rendered":"https:\/\/www.bnreport.com\/rbis-dollar-rupee-swap-auction-gets-bids-for-16-3-bn-against-5-bn-on-offer\/"},"modified":"2019-03-27T03:41:42","modified_gmt":"2019-03-27T03:41:42","slug":"rbis-dollar-rupee-swap-auction-gets-bids-for-16-3-bn-against-5-bn-on-offer","status":"publish","type":"post","link":"https:\/\/www.bnreport.com\/en\/rbis-dollar-rupee-swap-auction-gets-bids-for-16-3-bn-against-5-bn-on-offer\/","title":{"rendered":"RBI’s dollar-rupee swap auction gets bids for $16.3 bn against $5 bn on offer"},"content":{"rendered":"

Mumbai: Mint Road Tuesday seemed to have ushered in an era of stability for Indias currency and debt costs by holding a dollar-swap auction that drew three times more bids than the sum on offer, giving the central bank a potent tool to manage future system liquidity<\/a> without compromising the direction in yields.<\/p>\n

The Reserve Bank of India (RBI<\/a>) received bids for $16.3 billion versus $5 billion, the actual sum targeted to ensure enough system liquidity before the financial year draws to a close on March 31.<\/p>\n

\u201cBanks that need liquidity to expand credit have rushed to grab such attractive three-year money,\u201d said Bhaskar Panda, senior vice president, HDFC Bank. \u201cMore such auctions may come in the next financial year. Going by the weighted average premium, this rupee borrowing cost could be less than 8%.\u201d<\/p>\n

Banks could earn about 250 basis points higher than the spread if the rupee funds garnered Tuesday are deployed in attractive loan markets.<\/p>\n

This is how the swap mechanism would work: High-street banks would sell dollars to the RBI at 68.86 apiece, the closing price of the unit Tuesday. Three years later, they would buy back the dollars, in rupee terms, at 76.62 apiece \u2013 the exchange rate that includes the cut-off premium.<\/p>\n

The cut-off premium, the threshold for banks to receive any allotment, was pegged at 776 paisa. In percentage terms, this would be about 6.02%, or 13 basis points less than the three-year MIFOR (Mumbai Interbank Forwards Rate).<\/p>\n

Bank of Baroda, ICICI Bank, HDFC Bank, State Bank of India and some foreign banks with strong local presence are said to have bid. Individual banks could not be contacted immediately for their comments.<\/p>\n

\u201cThe premium was discovered by a market-determined auction process,\u201d said Ashutosh Khajuria, ED, Federal Bank. \u201cBanks can earn a good spread by deploying the rupee sum raised through the auction in different loan markets. There is clear visibility in credit growth going forward.\u201d<\/p>\n

To be sure, this is a \u201cFrench Auction\u201d where cut-off premium is not uniform, but banks will receive their auction allotment at their respective bids above the cut-off rateRead More \u2013 Source<\/strong><\/a>
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ET Markets<\/a><\/h5>\n

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