RBI’s $5 billion dollar/rupee swap aims to stabilise the rupee without depleting forex reserves

In the current calendar year so far, the rupee has weakened about 5 per cent or 426 paise against the dollar
| Photo Credit:
LeoWolfert

The Reserve Bank of India’s $5 billion dollar/rupee Buy/Sell swap auction for a three-year tenor scheduled for December 16^th is designed to enhance its capacity for market intervention while protecting forex reserves, experts suggest.

Analysts view this strategy as integral to stabilizing the rupee, which recently surpassed the critical 90-per-dollar threshold.

On Tuesday, the rupee strengthened approximately 20 paise to close at 89.8750 per dollar compared to its previous close of 90.07, boosted by a weaker dollar, lower crude oil prices, and reduced long-dollar positions.

Year-to-date, the rupee has depreciated by nearly 5% (426 paise) against the dollar.

“Through this three-year swap auction, the RBI will acquire dollars in the spot market while committing to sell them in the forward segment,” explained V Rama Chandra Reddy, Head of Treasury at Karur Vysya Bank.

“This approach fortifies the central bank’s ability to manage spot market volatility without diminishing forex reserves or disrupting rupee liquidity,” he added.

India’s foreign exchange reserves have decreased by $28.136 billion in 2025, falling to $686.227 billion as of November 28^th.

Strategic Intent Behind Swap

Amit Pabari, Managing Director at CR Forex Advisors, noted that while the RBI’s policy triad—a 25bps rate cut, ₹1 lakh crore OMO purchases, and the swap auction—appears rupee-negative at face value due to added liquidity, the swap serves a deeper strategic purpose.

A Buy/Sell swap injects rupee liquidity today while creating a future dollar sale obligation. Pabari highlighted parallels to early 2025, when similar RBI measures helped stabilize the currency during global uncertainty sparked by trade tensions under the Trump administration.

“Contrary to expectations, increased liquidity enabled more flexible spot market interventions by the RBI,” Pabari observed. “This contained volatility and reversed panic-driven depreciation.”

Published on December 9, 2025