Banking liquidity in deficit in December, RBI moves cap call rate
banking system liquidity slipped into deficit in December for the first time since June 2024 even as both tranches of the easing of cash reserve ratio (CRR) came into effect, infusing ₹1.16 lakh crore.
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Despite the deficit, the Reserve Bank of India has managed to keep overnight borrowing costs close to the policy repo rate by finetuning variable rate repo (VRR) auctions. The average call rate for December stood at 6.55%, five basis points above the repo rate. One basis point is 0.01 percentage point.
However, managing call rates through VRR auctions is a temporary option and the RBI will have to decide on how much it would want the rupee to depreciate, as intervention in the foreign exchange market is one of the biggest reasons for pressure on liquidity, economists said.
System liquidity has continuously been in deficit since December 16, with an average deficit of ₹68,469 crore, RBI data showed. Easing of CRR to 4% from 4.5% helped take some pressure off system liquidity, keeping overnight borrowing costs down, economists said.
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