RBI uses dollar-rupee swaps to reduce Indian firms' dollar costs
The Reserve Bank of India (RBI) has found a way to help Indian companies save money when borrowing in dollars.
By draining surplus liquidity in India's banking system through dollar-rupee swaps that have spurred a jump in FX forward premiums, the central bank has made it less expensive than taking out regular dollar loans, especially helpful now with US interest rates and inflation climbing.
Banks offer swap-linked rupee loans
Banks are jumping on this by offering new deals that mix rupee loans with these swaps, letting companies tap into cheaper overseas funds.
Sameer Karyatt, managing director and head of trading at DBS Bank India, points out that how much a company saves depends on its credit rating and spreads.
Swaps are catching on for longer timeframes too, especially as banks look to support their global branches, including those in GIFT City, with these flexible funding tools.