India’s central bank said on Tuesday it will conduct a two-day variable rate reverse repo auction worth one trillion rupees ($11.67 billion) on July 9.
The move follows the central bank’s decision last week to conduct a seven-day variable rate reverse repo auction worth 1 trillion rupees, which was held on July 4.
Earlier, on June 24, the RBI scrapped its plan to conduct a 14-day main operation scheduled for June 27, instead announcing a seven-day variable rate reverse repo auction.
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The RBI’s measured approach to withdrawing banking system liquidity will likely keep overnight interbank lending rates between the policy repo rate and the floor of the policy corridor, analysts said, allowing some policy transmission.
The central bank cut its policy rate by a steeper-than-expected 50 basis points last month, shifted its stance to ‘neutral’, and halted liquidity infusions. It resumed absorption operations on June 27 after overnight rates fell below the policy corridor.
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