Sources say the decision to strike an off-market deal was taken so that forward premiums on the dollar are not disturbed and the spot rupee does not appreciate past 42 against the greenback. "The foreign exchange market is volatile now. We will not attempt to disturb it," a source handling the issue said. However, indications are that the deal will be struck at a market-related rate.

The rupee touched an all-time low of 43.35 on Wednesday, while the annualised six-month forward premiums shot past 8 per cent. The Reserve Bank intervened by pumping in $100 million in the spot market, while State Bank has been receiving dollars in the forward segment in a bid to cool forward premiums.

Analysts say thedeal is likely to see the money market suffused with a liquidity of about Rs 6,000 crore in the first week of September. Dealers expect the spot rupee to appreciate once the proceeds start coming in. State Bank is likely to park $700 million of the proceeds abroad and bring in the rest. The bank is targeting a $2-billion collection through the issue.

"Although the market has discounted the inflow, once the actual proceeds come, the spot rupee will appreciate," a dealer at a private bank said.

Meanwhile, State Bank is likely to take a decision on the closure of the issue on Monday. Sources said that chairman MS Verma would take a decision in consultation with union finance minister Yashwant Sinha.

Till Saturday, the bank had collected $1.2 billion, but collection from the United States had still not been collated as there were differences in time zones. The hassles in marketing the issue in the US has also affected the initial collections. In the US, State Bank was able to market the issue only in thecounty of New York.

The issue is yet to be cleared in US counties. The bank has not pressed hard enough for a clearance from other counties as there is very little time left for the issue to close. Initially, the bank had targeted to collect about a fourth of the subscriptions from the US. The bulk of the actual subscriptions have come from the Gulf.

Earlier, Verma had stated that he was not averse to extending the closing date as the bank did not want to deprive expatriates a good investment opportunity.

"If the subscription crosses the target, State Bank may announce the closure of the issue. There is a growing feeling in the government that $2 billion to $2.5 billion may be the right amount," sources said.