<p>Mumbai: The Reserve Bank of India's (RBI) infusion of 500 billion rupees ($6 billion) through a two-day variable rate repo on Wednesday saw strong demand from banks, boosting hopes of more short-term cash infusions through March. </p><p>India's banking system liquidity deficit widened to the highest level in nearly eight years this week. </p> .Sensex scales 72k peak for first time; Nifty hits all-time high.<p>"Shortage of funds will only get exaggerated in the last quarter (of the fiscal year), which ideally also sees the strongest credit growth," a senior treasury official at a private bank said. </p><p>"We expect frequency of such repos to increase." </p><p>Banking system liquidity typically tightens in January-March as people withdraw cash from banks. </p><p>"In case, balance of payments surplus is small in Q4, then RBI will need to take further measures to address tightness in liquidity conditions," IDFC First Bank's economist Gaura Sen Gupta said. </p><p>She expects longer tenor repo auctions. </p><p>A Prasanna, head of research at ICICI Securities Primary Dealership, also believes the RBI will have to rely more on repos in the next quarter. </p><p>It may conduct shorter-term repos and keep rolling them over, he added. </p><p>Despite the liquidity infusion, overnight rates are above the marginal standing facility rate of 6.75 per cent, which is the upper end of the monetary policy rate corridor. </p><p>The weighted average interbank call money rate was at 6.84 per cent on Wednesday, while the weighted average triparty repo rate was at 6.78 per cent.</p>
<p>Mumbai: The Reserve Bank of India's (RBI) infusion of 500 billion rupees ($6 billion) through a two-day variable rate repo on Wednesday saw strong demand from banks, boosting hopes of more short-term cash infusions through March. </p><p>India's banking system liquidity deficit widened to the highest level in nearly eight years this week. </p> .Sensex scales 72k peak for first time; Nifty hits all-time high.<p>"Shortage of funds will only get exaggerated in the last quarter (of the fiscal year), which ideally also sees the strongest credit growth," a senior treasury official at a private bank said. </p><p>"We expect frequency of such repos to increase." </p><p>Banking system liquidity typically tightens in January-March as people withdraw cash from banks. </p><p>"In case, balance of payments surplus is small in Q4, then RBI will need to take further measures to address tightness in liquidity conditions," IDFC First Bank's economist Gaura Sen Gupta said. </p><p>She expects longer tenor repo auctions. </p><p>A Prasanna, head of research at ICICI Securities Primary Dealership, also believes the RBI will have to rely more on repos in the next quarter. </p><p>It may conduct shorter-term repos and keep rolling them over, he added. </p><p>Despite the liquidity infusion, overnight rates are above the marginal standing facility rate of 6.75 per cent, which is the upper end of the monetary policy rate corridor. </p><p>The weighted average interbank call money rate was at 6.84 per cent on Wednesday, while the weighted average triparty repo rate was at 6.78 per cent.</p>