The Reserve Bank of India (RBI).
Credit: Reuters File Photo
Mumbai: India's central bank will conduct a variable rate repo (VRR) auction for a third time in less than two weeks later 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 500 billion rupees ($6 billion) later in the day based on "a review of current and evolving liquidity conditions", the central bank said.
The RBI had infused 1.75 trillion rupees through a seven-day VRRR on December 22 and 1 trillion rupees in the prior week that matured on December 22.
Last week, Reuters reported market participants expected the central bank to provide short-term cash infusion as the banking system liquidity deficit ballooned to near eight-year highs.
The deficit was 2.68 trillion rupees as of December 26, its highest level since April 2016.
Despite the liquidity infusion, overnight rates continue to remain above the marginal standing facility (MSF) rate of 6.75 per cent, which is the upper end of the monetary policy corridor.
The weighted average interbank call money rate was at 6.89 per cent on Wednesday, while the weighted average TREPS rate was at 6.79 per cent. ($1 = 83.3200 Indian rupees)