PBoC sells 90 bln yuan of 7 day reverse repo at 1.4%

PBoC sells 90 bln yuan of 7 day reverse repo at 1.4%

India's central bank, the Reserve Bank of India (RBI), has announced a two-day variable rate reverse repo auction worth Rs 1 trillion ($11.67 billion) on July 9. This move follows the RBI's decision last week to conduct a seven-day variable rate reverse repo auction worth Rs 1 trillion, which was held on July 4 [1].

The RBI's latest auction is part of its measured approach to withdrawing banking system liquidity. This strategy aims to keep overnight interbank lending rates between the policy repo rate and the floor of the policy corridor, according to analysts. The central bank had earlier scrapped its plan to conduct a 14-day main operation scheduled for June 27, opting instead for a seven-day variable rate reverse repo auction [1].

The RBI cut its policy rate by a steeper-than-expected 50 basis points last month and shifted its stance to 'neutral', halting liquidity infusions. It resumed absorption operations on June 27 after overnight rates fell below the policy corridor [1].

The latest auction is expected to help the RBI manage liquidity conditions in the banking system. By absorbing Rs 1 trillion, the central bank aims to control the overnight interbank lending rates and facilitate the transmission of monetary policy.

The RBI's actions are part of its broader efforts to stabilize the financial markets and maintain economic growth. The central bank's measured approach to liquidity management is likely to have a positive impact on the financial system, analysts say.

References:
[1] https://www.business-standard.com/finance/news/rbi-announces-rs-1-trn-reverse-repo-auction-on-july-9-to-absorb-liquidity-125070801229_1.html