The first has to do with the RBI’s fundamental discomfort with the very idea of OMOs. This implicitly encourages fiscal indiscipline.The second reason is that by supplying a large amount of forwards, RBI wants to pull premia down. The one-year forward premium is, incidentally, down by a third of a percentage point since the announcement of the swap on March 13. The assumption could be that the commitment to buy the large amount of dollars all in one shot through the swap would arrest the rupee rise. The only way to prevent further appreciation would have to be good old-fashioned day-to-day intervention — buying dollars in the market to prevent appreciation.

Source: Economic Times March 21, 2019 18:11 UTC