(Updates with details, background)
By Neha Dasgupta and Suvashree Choudhury
MUMBAI Aug 22 The Reserve Bank of India said it
would conduct more frequent term repos but retained the overall
borrowing limit for lenders, in a bid to make borrowing more
flexible without injecting additional liquidity into markets.
Bond markets barely moved on the measures, with the 10-year
benchmark 2024 bond and the overnight cash rates
broadly steady from levels before the announcement.
By issuing more frequent term repos, the RBI addresses a key
complaint by banks, which had said irregular auctions of these
cash-for-loan transactions had made it difficult to manage
near-term cash needs.
Term repos are loans the RBI extends to banks, for which
government bonds act as collateral for a specified period of
RBI Governor Raghuram Rajan said earlier this month the
central bank would conduct shorter-duration repos, and issue
them more frequently, but has ruled out increasing the amount of
The central bank strives to ensure a certain level of cash
shortage as part of its strategy to curb inflation.
"When you look at the announcements, there has been nothing
new announced except for some flexibility on term repos," said
Jayesh Mehta, country treasurer and managing director at Bank of
America Merrill Lynch in India.
The RBI said it would conduct 14-day term repo auctions four
times during a two-weekly reporting cycle, or every Tuesday and
Friday, from Sept. 5.
The central bank will also conduct 3 to 4-day term repo
auctions but only from Sept. 5 to 12.
To further manage liquidity conditions starting next month,
the RBI said it could also auction overnight variable rate
repos, while saying it could also choose to sell part of the
government's cash balances.
(Reporting by Neha Dasgupta and Suvashree Dey Choudhury;
Additional reporting by Swati Bhat; Editing by Rafael Nam and