RBI dollar rupee swap 2025 matured on August 4 without rollover, absorbing ₹43,000 crore liquidity. Know how this impacts banking, forex, and exam-relevant current affairs.
RBI to Deliver $5 Billion Dollar‑Rupee Swap Without Rollover
Overview of the Swap Operation
The Reserve Bank of India (RBI) has confirmed delivery of a $5 billion dollar‑rupee buy‑sell swap, maturing on August 4, 2025, instead of opting for a rollover. Introduced in January 2025, the six‑month swap was executed to inject rupee liquidity into the banking system by buying dollars in exchange for rupees. At maturity, the RBI sells dollars and withdraws rupees, absorbing liquidity from the system.
RBI’s Decision Amid Surplus Liquidity
India’s banking system currently enjoys a significant liquidity surplus—estimated at over ₹3.60 lakh crore, equivalent to around 1.5% of total deposits—well above the RBI’s comfort zone of 1%. As a result, the RBI deemed rollover unnecessary and allowed the swap to mature normally, draining rupee liquidity without destabilizing markets.
Impact on System Liquidity
By delivering the swap, the RBI absorbs approximately ₹43,000 crore from the banking system, tightening liquidity modestly but not significantly. Money market indicators such as the cash‑tomorrow swap rate—quoted at 0.34/0.35 paisa (around 5.8% annualised)—reflect minimal disturbance and comfortably track near the interbank call rate.
Market Response and Stability
Bankers and economists widely agree that the RBI’s move is unlikely to cause volatility in money markets. Traders have not observed state bank intervention or large secondary swap activity, signaling confidence in the system’s capacity to absorb the liquidity impact.
Strategic Liquidity Management by RBI
Under Governor Sanjay Malhotra, the RBI continues to leverage a mix of tools—open market operations, CRR cuts, variable rate repo auctions, and long‑term dollar‑rupee swaps (e.g., a three‑year $10 billion swap)—to precisely calibrate liquidity, maintain currency stability, and support economic activity without over‑stimulating credit growth.
Why This News Is Important
For Banking and Monetary Policy Exams
This event illustrates how the RBI manages liquidity using FX swaps as part of its broader toolkit. Understanding the swap mechanism and its timing is essential for questions on liquidity management, monetary transmission, and central bank operations.
For Economy‑Focused Exams (e.g., SSC, CAPF, IAS)
The decision to deliver the swap instead of rollover signals that India’s rupee liquidity is ample, reducing reliance on emergency measures. It demonstrates the RBI’s commitment to calibrated liquidity absorption to control inflation and maintain financial stability.
Historical Context
Origins of the 2025 Swap Programme
Amid tight liquidity in early 2025, the RBI initiated multiple dollar‑rupee swap operations totaling $25 billion, including a key $5 billion six‑month swap in January and a $10 billion three‑year swap in February. These were designed to inject rupees and stabilize funding conditions. Informist Media+4The Economic Times+4ETCFO.com+4
Evolution of RBI’s Liquidity Tools
Over recent years, the RBI has increasingly employed currency swaps, open-market operations, repo operations, and CRR adjustments as essential instruments to maintain macro‑financial stability. These tools work together to manage both short-term liquidity and currency valuation.
Precedents of Swap Delivery
In March 2024, the RBI allowed a similar $5 billion swap to mature without rollover, helping replenish forex reserves while drawing down rupee liquidity— setting a precedent for the current more technical yet familiar decision.
Key Takeaways from RBI Dollar‑Rupee Swap Decision
| S. No. | Key Takeaway |
|---|---|
| 1. | RBI delivered the $5 billion dollar‑rupee swap, maturing on August 4, 2025, without rollover. |
| 2. | Delivery involves selling dollars and absorbing rupees, withdrawing ₹43,000 crore from system liquidity. |
| 3. | Current liquidity surplus (~₹3.6 lakh crore; ~1.5% of deposits) justified non‑rollover. |
| 4. | Money markets remained stable, with swap rates close to call rate, indicating smooth market absorption. |
| 5. | Reflects RBI’s calibrated liquidity strategy combining FX swaps, CRR cuts, and open market operations. |
FAQs – Frequently Asked Questions
1. What is a dollar-rupee swap by the RBI?
A dollar-rupee swap is a forex operation where the RBI buys or sells dollars in exchange for rupees with an agreement to reverse the transaction after a specified period. It helps manage liquidity in the banking system.
2. Why did RBI not roll over the $5 billion swap in August 2025?
The RBI decided not to roll over the swap because the banking system already had surplus rupee liquidity. Rolling it over was unnecessary as liquidity tightening was required.
3. How much liquidity will be absorbed by this swap maturity?
The maturity of the $5 billion swap will absorb approximately ₹43,000 crore from the banking system.
4. What was the maturity date of the $5 billion RBI swap?
The $5 billion swap matured on August 4, 2025.
5. Will this impact banking operations or market rates?
No major disruptions are expected. The money markets remained stable, and swap rates were in line with the call money rate, suggesting minimal impact.
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