RBI Declares 2-day Repo Auctions For $6 Bn
India's central bank is going to conduct a variable rate repo (VRR) auction for a third time in an interval of less than two weeks on Wednesday as liquidity conditions stay tight and overnight rates remain elevated.
“The Reserve Bank of India (RBI) will conduct a two-day repo for Rs 500 billion rupees (USD 6 billion) later in the day based on a review of current and evolving liquidity conditions,” the central bank said.
The RBI had infused Rs 1.75 trillion through a seven-day variable reverse repo rate (VRRR) on 22 December and Rs 1 trillion in the prior week that matured on 22 December.
Last week, media agencies reported that market participants are anticipating that the central bank will provide short-term cash infusion as the banking system liquidity deficit ballooned to near eight-year highs.
The deficit was Rs 2.68 trillion as of 26 December, its highest level since April 2016.
In spite of the liquidity infusion, overnight rates have continued to remain above the marginal standing facility (MSF) rate of 6.75 per cent, which is the upper end of the monetary policy corridor.
Also, the weighted average interbank call money rate was at 6.89 per cent on Wednesday, while the weighted average treasury bill repurchase (TREPS) rate was at 6.79 per cent.
