The Reserve Bank of India (RBI) infused liquidity amouting to ₹82,650 crore into the banking system on Friday via the 14-day Variable Rate Repo (VRR) auction amid tightening liquidity.

Against the notified ₹1 lakh crore under the VRR auction, banks borrowed ₹82,650 crore at a weighted average rate of 6.53 per cent.

“The RBI is preparing to ensure that there is no liquidity crunch in the system. Now onwards, tax payments will be coming up, SDL (state development loan) borrowings have to go through, and maturing LTROs (long-term repo operations) have to be repaid.

“RBI may conduct one more VRR auction after today’s VRR gets reversed,” said Madan Sabnavis, Chief Economist, Bank of Baroda.

At February 8th bi-monthly monetary policy review, RBI Governor Shaktikanta Das noted that in the period ahead, while higher government expenditure and the anticipated return of forex inflows are likely to augment systemic liquidity, it would get modulated by the scheduled redemption of LTRO and TLTRO (Targeted LTRO) funds during February to April 2023.

“The Reserve Bank will remain flexible and responsive towards meeting the productive requirements of the economy. We will conduct operations on either side of the LAF/liquidity adjustment facility, depending on the evolving liquidity conditions,” Das then said.

Published on March 10, 2023