The Reserve Bank of India (RBI) undertook the second $5 billion forex swap auction on Tuesday. The move was taken in order to improve the pace of monetary transmission and improve the liquidity in the economy. Under the foreign exchange swap, the RBI bought $5 billion from the market through auction for three years. However, it will sell the same amount back to the respective counterparties during the same month in 2022. The decision to conduct purchase of government securities under open market operations (OMO) for an aggregate amount of Rs 125 billion on May 02, 2019 through multi-security auction using multiple price method was based on the prevailing liquidity conditions and durable liquidity needs going forward, the RBI said in a statement. The move helped RBI attract bids worth $18.65 billion for the auction, from which, it accepted 5 offers. The bids were accepted at a premium of Rs 8.38, which is higher than Rs 7.76 in the first auction carried in March 2019. Thus, the total liquidity injected into the banking system via the swap operation amounts to be Rs 34,874 crore, RBI said. READ ALSO:\u00a0Neogen Chemicals IPO for Rs 132 crore kicks off: 4 key things to know The RBI plans to conduct total Rs 250 billion purchase of government securities under Open Market Operations during May 2019 via two auctions of Rs 125 billion each. The amount of dollars raised via these operations will reflect in the RBI\u2019s foreign exchange reserves for the tenor of the swap while also reflecting in the RBI\u2019s forward liabilities. The Reserve Bank of India\u2019s recent decision to inject $5 billion through foreign exchange reserve swap has been taken to help banks quickly cut interest rates in line with the monetary policy. The move would not only improve the liquidity and monetary transmission in the economy, but also help controlling the currency appreciation, Murthy Nagarajan, Tata Mutual Fund\u2019s Head-Fixed Income had told Financial Express Online last month during an interview. He had further suggested the banks to link their lending rates and deposit rates to the repo rate prevailing in the economy for better monetary policy transmission.\u201cIf borrowing rates and lending rates are made floating and benchmarked to the repo rates, monetary transmission in the Indian economy will be quicker,\u201d said Nagarajan.