RBI announces $5 billion Dollar-Rupee sell swap to stabilize rupee

• RBI announced a three-year Dollar-Rupee sell swap worth $5 billion, the first such instance in six years.
• The swap involves banks selling US Dollars to the RBI for rupees, with a future agreement for the RBI to sell the Dollars back at a pre-determined rate.
• It functions as a liquidity management tool to decrease rupees in the banking system, helping control inflation.
• The mechanism also aims to stabilize the rupee by providing US Dollars to the market, increasing dollar liquidity.

Why It Matters: RBI's swap manages liquidity, controls inflation, and stabilizes the rupee.