RBI injects Rs 25,000 cr via VRR route to boost system liquidity
RBI) injected funds into the banking system as the weighted average call rate, a barometer for short-term borrowing costs, rose 23 basis points above the policy repo rate at 6.73% on Friday.
Surplus liquidity in the banking system shrank to ₹84,154.75 crore due to monthly GST outflows. This is akin to a fine-tuning exercise to manage call rates near the repo rate, as monthly tax outflows drew surplus liquidity out of the banking system, money market experts said.
The RBI injected funds worth ₹25,000 crore via a variable rate repo auction (VRR) to ensure that recent overseas outflows from local debt and equity do not drive up banks' cost of funds, analysts said. This is the second such auction that the RBI has conducted post its change in stance to neutral from withdrawal of accommodation.
On Thursday, surplus liquidity — as measured by absorption of funds by the RBI — dropped to a one-month low of ₹84,154.75 crore, central bank data showed.
«The RBI has been very flexible and quick to manage liquidity. I am also expecting some VRR auctions to happen around mid December when there are advance tax outflows,» said Vikas Goel, MD and CEO at PNB Gilts. «The RBI wants to keep durable liquidity positive and roughly about 1% to 1.2% of NDTL, to make sure that the call rates don't move away from the repo rate,» he said.
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