RBI FX Swaps Open Cheaper Dollar Funding For Indian Firms

The Reserve Bank of India has been using swaps involving dollars and rupees to manage money in the banking system.

These transactions have pushed up the cost of trading rupees for dollars in the future.

This change can help some Indian companies borrow money in rupees and then use a swap to turn that borrowing into dollars.

For eligible companies, this may cost less than borrowing dollars directly from overseas markets.

Direct dollar borrowing has become more expensive because US government bond yields have risen.

Expectations of more Federal Reserve rate increases may add to those costs.

Banks are offering companies combined loan and currency-swap arrangements.

Companies usually want these arrangements for up to three years.

The final savings depend on the company’s credit rating and the borrowing rates available in India and abroad.