RBI conducts 3 VRR auctions in a day as overnight rates go past MSF rate

The weighted average money market rate closed at 6.77 per cent on Friday, compared to 6.73 per cent on Thursday. The MSF rate currently stands at 6.75 per cent

The Reserve Bank of India (RBI) conducted three variable rate repo (VRR) auctions on Friday to ease the liquidity tightness in the banking system.

The liquidity deficit in the system widened to Rs 1.38 trillion on Thursday, latest data by the central bank showed.

Consequently, weighted average money market rates rose above the marginal standing facility (MSF) rate.

The weighted average money market rate closed at 6.77 per cent on Friday, against 6.73 per cent on Thursday. The MSF rate currently stands at 6.75 per cent.

Market participants said liquidity deficit within the system is expected to persist. This is because the Centre’s borrowing programme for the next financial year will start from the first week of April.

RBI data showed that the liquidity deficit in the banking system was Rs 138.65 trillion on Wednesday compared to Rs 97,529 crore on Tuesday. 

“The government spending may help a bit, but there is caution among banks given it’s the end of the financial year. They don’t want to let go of the funds,” said a dealer at a state-owned bank.

“We have auctions around Rs 1.5 trillion in the last week of March. The funds will be absorbed by the government itself,” he added.

In the first 14-day VRR auction, the RBI received bids from banks aggregating Rs 1.05 trillion against the notified amount of Rs 25,000 crore.

The central bank allotted funds amounting to Rs 25,004 crore at a weighted average rate of 6.73 per cent.

At the second four-day VRR auction, the RBI received bids from banks aggregating Rs 1.32 trillion against the notified amount of Rs 50,000 crore. The central bank allotted funds amounting to Rs 50,005 crore at a weighted average rate of 6.74 per cent.

At the third four-day VRR auction, the RBI received bids from banks aggregating Rs 40,700 crore against the notified amount of Rs 50,000 crore. The central bank allotted funds amounting to Rs 40,700 crore at a weighted average rate of 6.73 per cent.

RBI approves AY25 Budget

Manojit Saha

The central board of Reserve Bank of India met on Friday in Nagpur and discussed issues related to economic outlook and global financial market volatility while approving the central bank’s budget for the accounting year 2024-25. “The Board reviewed the global and domestic economic situation and outlook, including the challenges posed by geopolitical developments and global financial market volati­lity,” RBI said.