RBI Fires Liquidity Lifeline: ₹1.41 Lakh Crore Injected Via VRR to Counter Tax Outflows
The Reserve Bank of India (RBI) injected a significant amount of transient liquidity into the banking system on Tuesday through a seven-day variable rate repo (VRR) auction. The central bank infused ₹1,41,171 crore into the market, conducting the operation at a cut-off and weighted average rate of 5.26 per cent.This intervention comes as the financial ecosystem faced liquidity tightness due to increased outflows within the banking sector. As of June 22, the system recorded a deficit of ₹19,971.89 crore in liquidity, compared to a surplus of ₹30,685.11 crore reported on June 21.
Managing Liquidity Deficit Amid Tax Payment Pressures
Experts have pointed to substantial outflows associated with Goods and Services Tax (GST) payments as the primary cause for the systemic liquidity tightening. These tax-related outflows created pressure that necessitated the RBI's targeted injection of funds into the banking system.The increased deficit has exerted noticeable pressure on overnight money market rates. Consequently, the weighted average call money rate was trading at 5.43 per cent, which registers 0.18 per cent above the prevailing RBI repo rate. Tri-party repo (TREPS) rates were also trading marginally over the repo rate by a margin of 0.05 to 0.07 per cent.
Central Bank's Sustained Liquidity Infusion Strategy
The Reserve Bank of India has been actively maintaining liquidity flow into the banking system in recent days. This ongoing commitment is directly aimed at countering the pressure created by recurring outflows resulting from advance tax payments within the financial sector.In total, the RBI infused approximately ₹2.43 lakh crore through various variable rate repo (VRR) auctions conducted over the past few days to stabilize market conditions. This proactive measure reflects the central bank's commitment to managing systemic liquidity pressures effectively.
Breakdown of Recent Liquidity Injections
The RBI data provides a detailed breakdown of its recent interventions across different maturities and auction dates. The seven-day VRR auction on June 16 resulted in an injection of ₹89,440 crore.Prior infusions include the injection of ₹72,300 crore through two separate VRR auctions held on Wednesday. Furthermore, the RBI injected ₹16,750 crore via a three-day VRR auction conducted on Friday. The central bank also provided an overnight infusion of ₹36,300 crore on Monday and another tranche of ₹28,220 crore through an overnight VRR auction held on June 15.
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