 "Photo: Kamlesh Pednekar")
The Reserve Bank of India will conduct overnight repo auction for Rs 2 lakh crore to provide banks the liquidity to meet the cash reserve ratio (CRR) requirement.
The repo auction, under the liquidity adjustment facility (LAF) would be conducted between 9.30 am and 10.30 am on Monday, RBI said in a statement.
Treasury executives said this step was to be seen against the backdrop of the weekend announcement that 100 per cent CRR incremental deposits would be imposed between September 16 and November 11. This would impound about Rs 3.5 lakh croe.
While there has been excess liquidity in deposits since the Narendra Modi-led government’s demonitisation move, some banks might run short of cash (for a temporary period) due to the weekend announcement. They could run the risk of inability to maintain the CRR level for a short period.
The government had on November 8 announced that Rs 500 and Rs 1,000 currency notes would cease to be legal tender.
Successful bidders would get the allotment at their respective bid rates. Bids at or below the repo rate (6.25 per cent) would be rejected, RBI said.
The reversal of the Overnight variable rate repo will take place on November 29, 2016 (Tuesday).
