MUMBAI: The Reserve Bank of India (RBI) performs a 14-day floating rate repo auction worth 500 billion rupees ($6.11 billion) on Friday after reviewing current and developing liquidity conditions in the banking system, it said on Thursday.
The liquidity surplus of the country’s banking system averaged over Rs 550 billion in May, but most of the surplus is in the hands of a few big banks, forcing most lenders to rely on interbank lending to meet cash needs .
The central bank injects liquidity into the banking system via repurchase agreements and drains it via reverse repurchase agreements. A 15 day reversal repo valued at 84.47 billion rupees is due on Friday.
Earlier this week, Reuters reported, citing sources, that banks had informally asked RBI to help manage liquidity.
“The repo auction at a time when liquidity has improved suggests that the RBI dividend may not be huge, especially given what is reflected in the prices,” said a trader at a private bank.
Traders expect an excess remittance of around Rs.1-1.5 trillion to the government. The RBI board will meet on Friday to consider the dividend payment.
The liquidity surplus of the country’s banking system averaged over Rs 550 billion in May, but most of the surplus is in the hands of a few big banks, forcing most lenders to rely on interbank lending to meet cash needs .
The central bank injects liquidity into the banking system via repurchase agreements and drains it via reverse repurchase agreements. A 15 day reversal repo valued at 84.47 billion rupees is due on Friday.
Earlier this week, Reuters reported, citing sources, that banks had informally asked RBI to help manage liquidity.
“The repo auction at a time when liquidity has improved suggests that the RBI dividend may not be huge, especially given what is reflected in the prices,” said a trader at a private bank.
Traders expect an excess remittance of around Rs.1-1.5 trillion to the government. The RBI board will meet on Friday to consider the dividend payment.
