Means RBI will sell $5bn USD on March 10, 2022. It will also buyback $5bn USD on March 11, 2024, two years later.
Banks can say ok I want $100 USD and I will expect RBI to pay me back say Rs. 2.5 more after two years. That's the "auction" where banks will bid for the premium.
Banks can say ok I want $100 USD and I will expect RBI to pay me back say Rs. 2.5 more after two years. That's the "auction" where banks will bid for the premium.
If I'm a bank I can borrow 100 USD at say Rs. 75 so I have to pay back 100 USD in two years, so how much rupees should I get? Effectively, I will quote the two year interest on the rupee - roughly 4.5% a year +/-some view on how the rupee will depreciate in the meantime.
Or roughly, the two year forward premium on the USDINR.
RBI gets to sell USD today and will buy it back later. The swap is:
* a Spot Sale in march 2022
* a Forward purchase in March 2024
For the RBI. It will reduce forex reserves since USD is being sold today.
RBI gets to sell USD today and will buy it back later. The swap is:
* a Spot Sale in march 2022
* a Forward purchase in March 2024
For the RBI. It will reduce forex reserves since USD is being sold today.
Forward purchases will go up. Current forwards are $49 billion (as of December) and should go up by $5bn. 
Effectively, this allows the RBI to sell USD and generate some profit, and to reduce overall rupee supply today (there's a lot of excess rupees in the system)
These swaps are non cancellable (so no one can exit in the middle).
These swaps are non cancellable (so no one can exit in the middle).
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