RBI Injects Rs 1.41 Lakh Crore to Boost Banking System Liquidity
Banking system slips into deficit amid GST and advance tax-related outflows; central bank steps in to stabilise short-term rates.
New Delhi, Jun 24: The Reserve Bank of India (RBI) on Tuesday infused Rs 1.41 lakh crore into the banking system through a seven-day Variable Rate Repo (VRR) auction, responding to emerging liquidity pressures triggered by tax-related outflows.
According to data released by the central bank, the auction saw an infusion of Rs 1,41,171 crore at a cut-off rate and weighted average rate of 5.26 per cent.
The move comes after system liquidity slipped into deficit, with the banking sector recording a shortfall of Rs 19,971.89 crore on June 22, compared with a surplus of Rs 30,685.11 crore a day earlier.
Market participants attributed the tightening liquidity conditions primarily to outflows linked to Goods and Services Tax (GST) collections, along with advance tax payments that have recently drained funds from the banking system.
The liquidity deficit has pushed overnight money market rates above the RBI’s policy repo rate. The weighted average call money rate was trading at 5.43 per cent, while tri-party repo (TREPS) rates were hovering around 5 to 7 basis points above the benchmark rate.
To prevent excessive volatility in short-term funding markets, the RBI has been conducting a series of VRR operations over the past several days. With the latest auction, the central bank’s cumulative liquidity support through various short-term repo operations has crossed Rs 2.43 lakh crore.
Recent interventions included liquidity injections of Rs 36,300 crore through an overnight VRR auction on Monday, Rs 16,750 crore via a three-day auction on Friday, and Rs 72,300 crore through two separate VRR operations last week. Earlier this month, the RBI also infused Rs 89,440 crore through a seven-day auction and Rs 28,220 crore through an overnight operation.
Analysts said the central bank’s actions are aimed at ensuring adequate liquidity in the financial system and maintaining stability in money market rates during a period of elevated tax-related cash outflows.
