MUMBAI, JUNE 17 (IANS): The Reserve Bank of India (RBI) on Wednesday infused Rs 72,300 crore of transient liquidity into the banking system through two Variable Rate Repo (VRR) auctions after surplus liquidity in the system declined sharply following advance tax-related outflows.
The central bank injected Rs 50,016 crore through a two-day VRR auction at a cut-off rate of 5.26 per cent. It further infused Rs 22,284 crore through another two-day VRR auction conducted on the same day.
Variable Rate Repo auctions are one of the RBI’s key liquidity management tools and are used to address temporary mismatches in liquidity conditions within the banking system.
The move comes as surplus liquidity in the banking system narrowed significantly. According to RBI data, liquidity surplus stood at around Rs 23,881.21 crore as of June 16, down sharply from approximately Rs 1.51 lakh crore recorded on June 15.
Market experts attributed the decline in liquidity largely to advance tax payments, which typically lead to a temporary withdrawal of funds from the banking system. They believe the RBI may continue to conduct similar operations in the coming days as additional outflows are expected due to Goods and Services Tax (GST) payments.
The liquidity infusion is expected to help ease short-term funding pressures and ensure smoother transmission of monetary policy.
