Mumbai: The Reserve Bank of India (RBI) on Tuesday injected Rs 48,014 crore into the banking system through a seven-day variable rate repo (VRR) auction. The move is aimed at supporting short-term liquidity in the system.
The funds were provided at a cut-off rate and weighted average rate of 5.26%, according to official data.
Lower Than Expected Infusion
The liquidity injected was much lower than the notified amount of Rs 1.50 lakh crore. This came despite a sharp fall in liquidity levels due to advance tax payments by companies.
Banks did not demand the full amount offered, which resulted in a lower infusion than expected.
What Is VRR Auction?
A VRR auction is a tool used by RBI to provide short-term funds to banks. Under this system, banks bid for funds at different interest rates for a fixed period, in this case, seven days.
This helps the central bank manage liquidity and keep interest rates stable.
Liquidity Drops Sharply
Liquidity in the banking system has seen a sharp decline. As of March 16, surplus liquidity stood at around Rs 75,483 crore.
This is a significant drop from Rs 2.08 lakh crore recorded on March 15, before advance tax payments were made.
More Pressure Expected
Liquidity conditions are expected to tighten further in the coming days. This is mainly due to upcoming Goods and Services Tax (GST) payments, which will lead to more cash outflows from the system.
RBI’s Ongoing Efforts
Since January 2026, the RBI has injected around Rs 3.50 lakh crore of durable liquidity through open market operations (OMO), where it buys government securities.
These steps are taken to ensure enough money is available in the banking system.
Impact On Interest Rates
Due to continuous liquidity support, overnight interest rates have remained below the repo rate. This helps banks borrow funds at lower costs and maintain stability in the financial system.
The RBI continues to actively manage liquidity to support the banking system amid fluctuating cash flows. Its timely actions aim to keep interest rates stable and ensure smooth functioning of financial markets.
(With inputs from PTI)
