Kamal Ghorui
The Reserve Bank of India (RBI) on Tuesday injected Rs 48,014 crore in transient liquidity into the banking system through a seven-day variable rate repo (VRR) auction, even as surplus liquidity conditions narrowed sharply due to advance tax outflows, reported PTI.The funds were infused at a cut-off rate and weighted average rate of 5.26 per cent, according to the RBI’s release. The amount absorbed under the auction was significantly lower than the notified Rs 1.50 lakh crore, despite a notable drop in banking system surplus following tax payments by corporates.Under the VRR mechanism, the central bank provides short-term funds at variable interest rates, allowing banks to bid for liquidity support based on their requirements. The move is aimed at managing short-term liquidity fluctuations and ensuring orderly conditions in money markets.Liquidity in the banking system is expected to tighten further in the coming days due to additional outflows linked to goods and services tax (GST) payments scheduled later this week. Market participants are closely monitoring the evolving liquidity scenario amid seasonal tax-related pressures.As of March 16, surplus liquidity in the banking system stood at around Rs 75,483.63 crore, sharply lower than Rs 2.08 lakh crore recorded on March 15 prior to advance tax payouts. The decline highlights the impact of large tax outflows on system liquidity during the closing weeks of the financial year.Since January 2026, the RBI has infused Rs 3.50 lakh crore of durable liquidity through open market purchases (OMO) of government securities. These measures form part of the central bank’s broader liquidity management strategy to stabilise short-term funding conditions.In recent months, the RBI has been actively injecting liquidity into the system to keep overnight money market rates under control. As a result of these interventions, overnight rates have been hovering sharply below the policy repo rate, reflecting ample liquidity conditions despite intermittent tightening episodes.
