The decision comes as US inflation data cooled, leading to expectations of lower bond yields and a stronger rupee.
After a recent dip to 86.60, the rupee recovered to 86.36 against the dollar, with further appreciation expected.
Also Read | Jahangir Aziz expects RBI rate cut in February
Daily repos, discontinued under former RBI governor Urjit Patel, were replaced with a 14-day liquidity cycle that required banks to forecast their needs for two weeks.
However, this system proved difficult to manage, prompting a gradual shift to shorter cycles. The return to daily repos is expected to stabilise deposit rates and support smoother transmission of future rate cuts.
The RBI’s move is seen as part of a broader strategy that could include a rate cut in February.
Also Read | Banks set for weaker earnings in the third quarter
The central bank is also actively intervening in the forex market through FX swaps to maintain liquidity, highlighting its proactive approach under fomer governor Shaktikanta Das.
For more details, watch the accompanying video
Catch all the latest updates from the stock market here
