MUMBAI (Reuters) - The RBI on Friday announced its first-ever term reverse repo auction to drain excess cash from the banking system, which traders attributed to bunched-up government spending after elections.
The Reserve Bank of India said it will conduct a 4-day term reverse repo variable rate auction for 150 billion rupees ($2.54 billion) on June 2 and can also accept an additional 100 billion rupees.
Earlier today, the central bank conducted a 600.04 billion rupees term repo auction setting a cut-off rate of 8.01 percent, a tad higher than its overnight repo rate of 8 percent, reflecting adequate liquidity in the system.
"Going by today's cut-off at the term repo it was evident the market was not willing to pay a premium to access liquidity as it is comfortable," said a senior treasury official with a foreign bank.
The interbank call rate has been hovering below the repo rate for about a week reflecting the comfortable interbank liquidity in the banking system.
The central bank will announce its monetary policy review on June 3 and most analysts expect it to hold its key policy rates steady.
(Reporting by Neha Dasgupta, Writing by Nandita Bose; Editing by Suvashree Dey Choudhury/Ruth Pitchford)
