RBI to inject liquidity via forex swaps

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  1. The Reserve Bank has decided to inject long-term liquidity into the system through foreign exchange swap arrangement.The word swap means exchange.Under this arrangement,banks would be required to keep dollar funds with RBI with a deal to buy it back from the RBI after three years.
  2. Swap is a new tool to enhance liquidity in the system through which RBI would buy as much as $5 billion from the banks in a swap deal.This would infuse nearly 35,000 crores into the system.
  3. The dollars raised through this arrangement will reflect in the RBI’s foreign exchange reserves.