RBI said the four-day fixed-rate repo in government of India dated securities for tomorrow would be six per cent. This, bankers said, would help absorb the excess liquidity in the money market. Jalan, in his policy statement, said in recent months, open market operations of the RBI, both through outright sales of government securities, repos and reverse repos, had gained considerable momentum. The primary objective was to absorb liquidity in the market, though under certain circumstances repos have also been used to signal changes in the interest rates, he said.

This is the second time within a month that the RBI had cut its Bank Rate and repo rate signalling the banks to bring down the lending rates. On April 1, the RBI cut the Bank Rate by 0.5 per cent and the repo rateby one per cent.

Following the credit policy, government securities reacted immediately and fell by 50 paise but recovered after the RBI announced a cut in the repo rate, market sources said.