RBI has pulled $10 billion of rupees from banks through sell‑buy swaps over the past two weeks, a clear sign that liquidity is being siphoned from the financial system.
The swap contracts, ranging from one month to roughly six months, have pushed the six‑month and one‑year dollar‑rupee rates up around 20 basis points to their highest levels since May, tightening the cost of funding for banks.
Historically, the RBI has auctioned swaps in $3‑$5 billion tranches; this latest intervention is larger, reflecting the record surplus of 11 trillion rupees in banking liquidity that foreign‑capital inflows of $140 billion have fed.
Gaura Sen Gupta, chief economist at IDFC First Bank, said the central bank has been using bond sales and sell‑buy swaps to keep the surplus in check, warning that without these tools the liquidity could have climbed to 15.5 trillion rupees.
Analysts watch closely as the RBI may execute another $10‑$15 billion of swaps before the fiscal year closes, a move that could tighten rates further and impact bank profitability.