The Reserve Bank of India's $5 billion dollar/rupee buy-sell swap auction on Friday is likely to see strong demand from lenders and corporate treasuries, six bankers said.

India’s central bank purchased a large quantum of bonds last week, with the monetary authority stepping in to ease a cash crunch that is currently at its widest level in more than a decade.

The Reserve Bank of India's unexpected purchase of government bonds pushed down bond yields on Monday and raised bets for a cut in interest rates in February,

India's central bank announced on Monday a host of measures to inject liquidity into the banking system, including bond purchases and dollar/rupee swaps, which analysts and traders said could be a precursor to a rate cut next month.

The Reserve Bank of India (NSE:BOI) (RBI) has announced measures to increase liquidity in the banking system. These actions include open market bond purchases and a buy-sell swap forex auction.