RBI announces 7-day repo, raises quantum in comparision to last week

India's central bank will conduct a variable rate repo (VRR) auction for a second straight week on Dec. 22, this time with a higher quantum of infusion, after reviewing "current and evolving liquidity conditions", it said on Thursday.

The Reserve Bank of India (RBI) will conduct a seven-day repo for Rs 1.75 trillion ($21.02 billion) against the maturing amount of one trillion rupees.

Earlier in the day, Reuters reported that market participants expect the central bank to provide another round of short-term cash infusion, as the banking system liquidity deficit hit levels last seen in 2016.

Outflows toward advance tax payments and goods and service taxes have tightened liquidity and the situation is likely to remain unchanged through the month-end, traders had said.

The banking system liquidity deficit rose to Rs 2.27 trillion as of Dec. 20, registering its highest level since April 1, 2016.

Despite the repo infusion last week, the weighted average interbank call money rate has stayed above the Marginal Standing Facility rate of 6.75% this week.