RBI to buy $5bn from banks to infuse liquidity

Under this newly launched liquidity infusion mechanism, banks sell dollars to the RBI and get rupee funds from it with the guarantee that the same bank will take back the dollars after three years, which is called the closure date of the swap process. So, in effect, banks get rupee funds at a time when they are short on liquidity, while the dollars that the RBI buys from the banks add up to the country’s foreign exchange (forex) reserves.

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