The Reserve Bank of India has announced a $5 billion dollar‑rupee buy‑and‑sell swap auction for May 26, a move aimed at easing liquidity pressure in the banking system as the rupee grapples with record‑breaking weakness against the US dollar. The swap will carry a three‑year tenor and will be conducted from 10:30 a.m. to 11:30 a.m., with banks selling US dollars to the central bank and agreeing to buy them back at the end of the period.
The rupee slipped to a fresh low of 96.9 against the dollar on May 20, extending its losing streak to nine consecutive sessions and widening its year‑to‑date depreciation to over 6 percent, according to market data. The slide has been fueled by elevated crude oil prices linked to the Middle East conflict, persistent foreign portfolio outflows, and a strong greenback, placing the Indian currency among Asia’s weakest so far this year.
The RBI described the swap as a mechanism to inject long‑term rupee liquidity into the financial system while managing foreign‑exchange reserves rather than permanently depleting them. Under the auction framework, banks will place bids in terms of the premium in paisa they are willing to pay for the three‑year tenure, with the central bank accepting successful bids at their quoted rates.
The latest swap echoes similar measures deployed over the past several months, including a $10 billion dollar‑rupee swap conducted on January 13, 2026, as part of a broader package to ease tight liquidity conditions. The central bank has also earlier tightened banks’ net open dollar positions and restricted non‑deliverable rupee derivatives as part of its calibrated efforts to contain volatility in the foreign‑exchange market.
As the rupee remains under sustained pressure, the RBI’s intervention signals a preference to guide orderly trading rather than reverse the currency’s trajectory outright. Market participants expect the swap will help stabilize funding conditions and support credit flows even as elevated oil imports and global risk aversion continue to weigh on the domestic currency.
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