UPDATE 1-Indian cash rates end flat but liqudity tight

(Updates to close)

MUMBAI, Sept 18 (Reuters) - Indian overnight cash rates ended flat on Thursday but cash conditions continued to be tight as outflows towards quarterly tax installments drained liquidity from the banking system.

Call rates INROND= ended at 10.00/10.25 percent, little changed from 10.10/10.20 at close on Wednesday. On Tuesday it had risen as high as 16 percent, its highest since April 2007.

"The advance tax outflows are keeping cash conditions tight, and the central bank is also buying rupees to support the currency, which is also affecting liquidity," a dealer with a private bank said.

Corporates and banks are currently making payments towards quarterly advance tax installments, draining about 400 billion rupees from the system, according to analyst estimates.

The central bank has said it will intervene in the currency market by selling dollars, either directly or through agent-banks, to meet demand-supply gaps. Dollar sales would thus drain out rupee liquidity from the system.

Dealers said cash rates could have risen as high as 25 percent if the central bank had not announced measures to try and contain call rates.

The Reserve Bank of India said on Tuesday, until further notice, it would conduct a second money market operation every day between 4 and 4:30 p.m. to alleviate the pressures and ensure liquidity in the money market.

It also said it would allow banks to obtain further liquidity of up to 1 percent of their deposits, in addition to the normal method of borrowing funds from the central bank. See ID[n:nBOM244763].