Mumbai: India’s Central Bank said on Tuesday that it would operate a seven-day variable rate reverse repo auction at a price of a trillion rupee ($ 11.62 billion) on 27 June, after reviewing the liquidity situation in the banking system.
According to the press release, the Reserve Bank of India (RBI) said that after developing the liquidity situation, it would not operate the 14-day main operation on Friday.
The liquidity of India’s banking system was at Rs 2.44 trillion till June 23, according to the surplus RBI data.
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In June, the Central Bank announced to surprise the reduction in the 100-basis-point in the cash reserve ratio, park the share of the deposited banks with the RBI, in the four identical trenches starting from September, reduced it to 3%, so that policy transmission could be promoted.
Between the condition of surplus liquidity, for the last few weeks, the average average average call rate at the bottom of the Standing Deposit feature remains well.
A frequent difference between RBI’s operative rate and policy rate usually indicates that according to bank traders, whatever is comfortable with the central bank, reaching cheap funding.
Earlier this month, Reuters reported that RBI could begin to operate variable rate reverse repo auction to suck surplus liquidity as required.
“This step (VRRR announcement) indicates that RBI wants the operative rate close to the repo rate,” said Gaura Sen Gupta, India’s economist at IDFC First Bank.
The step comes soon with expected transmission through various channels-caudits, deposits and bond markets-in his early stages, Sen Gupta said, saying that the move could further increase short-term yield.
($ 1 = 86.0580 Indian rupees)
(Reporting by Siddhi Nayak; editing by Vijay Kishore)
This report has been auto-generated from Reuters News Service. ThePrint does not have any responsibility for its content.
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