Mumbai: Higher demand from corporates to grab cheaper rupee loans has led to an increase in the premium at the Reserve Bank's second dollar/rupee buy-sell swap auction, say bankers and dealers.
In the auction conducted on Tuesday, the RBI set the cut-off premium at Rs 8.38 to a dollar as against Rs 7.76 in the maiden auction held on March 26. At both the auctions, the central bank mopped up $5 billion each.
"It looks like only corporates have participated in the second auction. Banks can get cheaper rupee loans from the market so they seem to have stayed away," said a senior dealer with a state-run bank on Wednesday.
According to analysts, while an AAA-rated corporate would get rupee term loan from the market at more than 8 per cent, it can raise money at around 7.75 per cent at the RBI's dollar/rupee swap auctions.
Bankers attributed the higher demand from corporates for the auction as part of their hedging. For instance, a company that has raised dollar funds abroad in the past can, if participated in the auction, use the money for hedging their positions.
"All the offers were largely driven by the croporates. Some of the corporates would have bid at higher levels as in the auction as they wanted to get cheaper rupee loans from the RBI to hedge their dollar borrowings," explained a senior forex dealer.
Total amount of bids received in the second auction was $18.65 billion as against an offer of $5 billion. In the first auction, the central bank had received $16.31-billion bids for a similar offer.
The number of bids received during the second auction was 255 and the RBI accepted only five bids. In the previous auction, the RBI got 240 bids and accepted 89. "This shows that only a couple of corporates have got the money in the second auction," said another treasurer.
