India's central bank is unlikely to undertake any bond purchases or reduce the cash reserve ratio and may instead prefer to stick to term repo auctions to add funds to the country's banking system, analysts said.
India's banking system liquidity slipped into deficit for the second time in one week on Tuesday. It dipped into deficit for the first time in nearly 40 months last week.
"The RBI may look at conducting 14-day or 28-day term repos and not opt for any permanent measure. They may not prefer doing outright open market purchases or cutting the cash reserve ratio," said Vijay Sharma, senior executive vice president at PNB Gilts.
"Some people are expecting OMOs (open market operations), but I do not endorse that view. For the next two to three months, they may stay with term repos."