Reserve Bank of India stopped second daily money market

The Reserve Bank of India has discontinued its second daily money market operations from Wednesday after a review of the liquidity conditions. The daily operations are the reverse repo auction, where banks can park excess funds at 3.25 percent, and the repo that banks can use to borrow funds at 4.75 percent when liquidity is tight. The second auction was introduced on Sept. 16, last year. The central bank will conduct only one auction between 9:30 a.m. (0400 GMT) and 10:30 a.m. (0500 GMT). Following are analysts' comments on the decision:

A. PRASANNA, ANALYST AT ICICI SECURITIES, MUMBAI:
"It is a situation of excess liquidity in the market and the single money market operation will help banks better plan their cash balances. "The reason why the central bank may have made this move is it may have run out of bonds to provide as collateral against the cash being parked and don't see it is as any other signal. "The excess liquidity in the system will make shorter end assets more attractive."

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