The Reserve Bank of India (RBI) conducted two back-to-back variable rate repo (VRR) auctions on Monday to ease liquidity tightness in the banking system.
The central bank had conducted two VRR auctions last Friday too.
At the first 4-day VRR auction, the RBI received bids from banks to draw down funds aggregating ₹1,23,310 crore against the notified amount of ₹25,000 crore. The central bank allotted funds amounting to ₹25,007 crore at a weighted average rate of 6.71 per cent.
At the second 4-day VRR auction, the RBI received bids from banks to draw down funds aggregating ₹97,280 crore against the notified amount of ₹25,000 crore. The central bank allotted funds amounting to ₹25,004 crore at a weighted average rate of 6.68 per cent.
Liquidity deficit
Market players say heavy demand for funds at the first VRR auction would have prompted the RBI to conduct a second one.
As of February 11, the overall liquidity deficit in the banking system was at ₹193,490 crore, per RBI date.
“The liquidity deficit has increased since the last policy in December 2023. Net LAF (liquidity adjustment facility) has remained in the deficit mode since mid-September 2023, with the system liquidity deficit at ₹1.5-lakh crore and an average of ₹1.8-lakh crore post-December 2023 policy.
“The RBI has been actively managing liquidity through main as also fine-tuning operations,” said Soumya Kanti Ghosh, Group Chief Economic Adviser, State Bank of India.
However, government surplus cash balances have increased to an average of ₹3.9-lakh crore post-December 2023 policy.
“With higher government surplus cash balances and reduced system liquidity, durable/core liquidity surplus...has come down moderately to ₹1.8-lakh crore,” he said.
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.