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India's central bank will infuse a record quantum of funds into the banking system through an overnight infusion on Wednesday, after it aggressively intervened in the foreign exchange (FX) market in the last two sessions.

The Reserve Bank of India (RBI) will pour in 2.50 trillion rupees ($28.85 billion) through an overnight variable rate repo auction. This will also be the biggest infusion by the RBI in a single day in over a year.

India's banking system liquidity deficit quadrupled in less than a week to around 2 trillion rupees as on February 10, with traders citing tax outflows and aggressive dollar sales by the central bank as reasons for the jump.

The RBI sold between $4 billion and $7 billion on Monday as it intervened in the FX market to support the rupee.

It continued selling dollars on Tuesday to shore up the currency that has been struggling due to portfolio outflows and uncertainty around U.S. trade tariffs, four traders told Reuters.

($1 = 86.6470 Indian rupees)