3 September 2026

RBI forex swap facility

The RBI forex swap facility is a specific monetary policy tool used for macroeconomic stability and liquidity management, which directly relates to the UPSC GS3 syllabus on Indian economy and resource mobilization.

Questions

1. Explain the mechanism of the RBI's USD-INR forex swap facility and discuss how it serves as a tool for managing currency volatility and rupee liquidity. 150 words
   Attempt this — 150 words in 8 min

   0 / 150 words 8:00 Reset
2. Examine the role of the Reserve Bank of India in managing foreign exchange reserves and maintaining monetary stability in the face of global economic headwinds and capital flight. 250 words
   Attempt this — 250 words in 11 min

   0 / 250 words 11:00 Reset

Prelims

1. What is the primary purpose of the RBI's 'short forward dollar' positions?

   1. A To directly finance the government's fiscal deficit.
   2. B To increase the supply of foreign currency in the spot market immediately.
   3. C To defend the rupee without drawing down spot reserves immediately.
   4. D To provide long-term loans to Foreign Portfolio Investors.

2. Which of the following instruments were covered under the RBI's special USD-INR forex swap facility introduced on June 8?

   1. A Government securities, Treasury bills, and Gold bonds.
   2. B Equity shares, Debentures, and Mutual funds.
   3. C FCNR(B) deposits, OFCBs, and ECBs.
   4. D Repo rate, Reverse repo rate, and Marginal Standing Facility.