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The Reserve Bank of India (RBI) will conduct a variable rate auction of 28-day term repo for a notified amount of Rs 10,000 crore on Friday. “The auction will be conducted as per the guidelines issued in October,” RBI on Thursday said.
RBI has also been conducting term repos of seven-day and 14-day tenor. These term repos were started in October initially for 0.25 per cent of net demand and time liabilities (NDTL) and then increased to 0.50 per cent of NDTL of the banking system.
The term repo rates have been hovering between the repo rate of 7.75 per cent and the marginal standing facility rate of 8.75 per cent. According to the guidelines, banks are required to place their bids with the term repo rate that they are willing to pay to RBI for the tenor of the repo expressed in percentage terms up to two decimal places.
Once the bidding time is over, all the bids are arranged in descending order of the term repo rates quoted and the cut-off rate would be arrived at the rate corresponding to the notified amount of the auction. Successful bidders are those who place their bids at or above the cut-off rate. All bids lower than the cut-off rate are rejected. No bids are accepted at or below the prevailing repo rate.
