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Charts & Analysis

14 Day Repo Auction Goes at 8.79%, Liquidity Still Tight

Today’s 14-day repo auction – for about 19,500 cr. (0.25% of NDTL) – has been auctioned at 8.79%. This is for banks to borrow money against securities, for a 14 day period.

The last such repo auction – a 7-day auction last friday – went at 8.84%. (weighted average)

The regular repo rate (fixed) is at 7.5%. MSF borrowing is at 9%. As I expected, these 7 and 14 day repo bids have come in closer to the MSF rate.

Because of these repos, MSF borrowing has reduced substantially. (Why borrow in MSF when you can borrow at marginally lower rates in these repo auctions?)

Here’s the overnight liquidity chart:

MSF Borrowing

As you can see, the total overnight borrowing from RBI stays around the Rs. 1 trillion (1 lakh crore) mark, including Repo (red line), Term repo (orange bars) and MSF (blue bars). That’s more than 1% of NDTL. Think of NDTL as all the deposits (which add up to about Rs. 80 lakh crores).

The RBI “comfort” limit for such overnight liqudity – which is really new money being created and given back each day – is about 1% of NDTL. I would expect more liquidity easing but rate tightening at the next policy (29th).