India central bank to infuse longer-term liquidity via 14-day variable repo

THE Indian central bank is infusing longer-term liquidity into the financial system, it said on Thursday (Feb 9).

The Reserve Bank of India (RBI) will conduct a 14-day variable rate repo auction on Feb 10, 2023 for an aggregate amount of 500 billion rupees (S$8 billion), it said in a release.

Liquidity in the banking system has been oscillating between a marginal deficit and a surplus over the last few days against the backdrop of a strong pick-up in bank credit and accelerated government spending.

The liquidity deficit stood at 112 billion rupees on Wednesday, down from a surplus of over 650 billion rupees at the start of the week.

The need for banks to maintain reserve requirements before Friday and for businesses to pay up excise taxes led to heavy borrowing from the overnight inter-bank market and pushed up call money rates to as high as 6.75 per cent, above the policy repo rate of 6.5 per cent.

While infusing liquidity, the RBI will skip a weekly variable rate reverse repo auction, designed to absorb liquidity this week, it said. REUTERS