The Reserve Bank of India (RBI) has decided to introduce a US dollar-rupee swap window for fresh foreign currency non-resident (banks) dollar funds, mobilised for a minimum tenor of three years and over. The swap window will be operational between September 10 and November 30.
While the swap facility will be available to all scheduled commercial banks (excluding regional rural banks) for fresh FCNR(B) deposits mobilised in any permitted currency for the tenor of minimum three years, the swap facility with RBI will be available in US dollars only.
The tenor of the swap will be for three years or more in line with the tenor of the underlying FCNR deposits, an RBI release on Friday said.
While the swap window will be operated on a daily basis on all working days, a particular bank can avail of the facility once a week. “During any week, the maximum amount of dollars that banks would be eligible to swap with RBI would be equal to the fresh FCNR(B) deposits for minimum tenor of three years mobilised in equivalent US dollar terms during the preceding week(s),” the release said. Under the swap arrangement, a bank can sell US dollars in multiples of one million to RBI and simultaneously agree to buy the same amount of US dollars at the end of the swap period. The swap will be undertaken at a fixed rate of 3.5% per annum.
In the first leg of the transaction, the bank will sell dollars to RBI at the reference rate or any other rate agreed upon. The settlement of the first leg will take place on spot basis from date of transaction. In the reverse leg, rupee funds will have to be returned to RBI with the swap premium to get back the dollars.