RBI Injects ₹72,300 Cr to Ease Banking Liquidity Crunch
By Sivam
The Reserve Bank of India injects ₹72,300 crore via VRR auctions to address a liquidity crunch caused by advance tax payments, stabilizing the banking system.
RBI Boosts Banking System with Rs 72,300 Crore
The Reserve Bank of India (RBI) has injected a significant Rs 72,300 crore into the banking system through two Variable Rate Repo (VRR) auctions. This crucial move aims to ease a liquidity crunch that followed recent advance tax payments, which had reduced surplus funds.
Auction Details and Rates
- The RBI infused Rs 50,016 crore via a two-day VRR auction.
- A second two-day VRR auction added another Rs 22,284 crore to the system.
- Both auctions were conducted at a consistent cut-off rate of 5.26 per cent.
Addressing Systemic Liquidity Mismatches
Variable Rate Repo auctions are a primary tool for the RBI to manage temporary liquidity mismatches within the banking system. This intervention directly responds to the decline in surplus liquidity, which the RBI noted as of June 16.
The liquidity squeeze intensified after companies made their advance tax payments, leading to a reduction in available funds within the banking system.