The Reserve Bank of India’s (RBI’s) move to provide a swap facility of $5 billion to banks will provide liquidity to them without causing any expansion to the central bank's balance sheet. It has also resulted in forward rates coming down and opens an opportunity for long-term dollar borrowers to hedge at a lower cost.
RBI Governor Shaktikanta Das has introduced the liquidity management tool, which was used once in the past by Raghuram Rajan in 2013 to rein in the rupee, which had depreciated a lot in a short period. But that was a different situation, and the measure was ...
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