* India cenbank keen to gauge dlr/INR swap sale response - bankers
* India cenbank to conduct $5bln buy-sell swap auction Mar 26
* India cenbank officials say step purely liquidity move - bankers
By Suvashree Choudhury
MUMBAI, March 18 (Reuters) - Senior officials from the Reserve Bank of India met about two dozen bankers on Monday for feedback on the central bank’s new cash infusion tool, according to two bankers who attended the meeting.
While the meeting was aimed at ironing out any procedural issues for implementing the central bank’s debut move, it also indicated the RBI’s willingness to smoothen tight cash conditions in the banking system, the bankers said.
The RBI will conduct a forward dollar/rupee buy-sell swap auction worth $5 billion on March 26, its first such move to infuse rupee liquidity into cash-strapped banks. Under this arrangement, the RBI will buy dollars from banks for three years promising a specified premium for selling back the same at maturity.
The announcement has already pushed down the one-year forward premium by 30 basis points to to 3.60 percent.
“They wanted to understand if we had any suggestions or issues with the implementation of the auction because it is a first for them as well,” said one of the bankers.
“They also didn’t say no to suggestions of conducting such auctions going ahead as well. They said ‘we will see’,” the banker added.
The central bank officials also reiterated that the swap auction was “purely to infuse liquidity” and not aimed at the forex market, the bankers said.
The RBI did not have an immediate response to an email seeking comments on the meeting.
There were some speculations that the RBI had timed the move to also absorb potential bunched-up forex inflows at March-end.
Bankers also suggested lowering the tenure of the swap to below three years as well as reducing the minimum bid size, which is $25 million currently.
While the central bank officials did not promise anything, they said they would like to assess response to the first auction before making any changes, the bankers said.
Some bankers also asked such announcements to be made much more in advance than it was done for the current one, since they needed time to arrange for underlying dollar liabilities from the investors, either in the form of deposits or bonds to offer to the central bank.
“They said this time they didn’t have time since they had to complete this before the end of current fiscal year (March),” said the second banker.
“They said this is an experiment, let’s see how it goes.” (Reporting by Suvashree Choudhury; Editing by Shreejay Sinha)