Banking Liquidity

The Reserve Bank of India (RBI) on Friday injected Rs 81,590 crore transient liquidity into the banking system through a three-day variable rate repo (VRR) auction. Transient liquidity is temporary cash flow fluctuations in a financial or banking system, while a Variable Rate Repo (VRR) auction is a monetary tool used by the RBI to inject short-term liquidity into the banking system. In a release the RBI said the funds were infused at a 5.26 per cent cut-off rate. The demand for funds still remained lower than the notified amount of Rs 1 lakh crore despite the sharp drop in liquidity surplus in the banking system. However, in comparison with the previous auction conducted on May 21, the demand is higher from banks in Friday's auction. Currently, the liquidity in the banking system is estimated to be in surplus of around Rs 58,876.29 crore as on May 21, as compared to Rs 1.51 lakh crore as on May 20. The tightness in the liquidity surplus has led to a sharp uptick in the overnight

Banks bid far below the notified amount at the RBI's short-term repo auction as surplus liquidity reduced the need for additional funds

The Reserve Bank of India (RBI) on Friday pulled out Rs 2,00,031 crore transient liquidity from the banking system through a seven-day variable rate reverse repo (VRRR) auction. The central bank had received higher bids worth Rs 2,28,098 crore than the notified amount of Rs 2 lakh crore in the auction. The RBI accepted the bid at a 5.24 per cent cut-off rate and 5.23 per cent weighted average rate. Currently, the liquidity in the banking system is estimated to be in surplus of around Rs 4.09 lakh crore. Before this, the central bank had conducted a seven-day VRRR auction on April 10 and pulled out Rs 2,00,041 crore of transient liquidity from the banking system. These funds were reversed today into the banking system. "Going ahead, we will continue to be proactive and pre-emptive in liquidity management and ensure sufficient liquidity in the banking system to meet the productive requirements of the economy," RBI Governor Sanjay Malhotra said during the April monetary policy.

Surplus liquidity in the banking system remained above Rs 5 trillion for the fifth straight day, supported by government spending and bond redemptions

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The net liquidity in the banking system has remained in deficit mode for four consecutive days. The system liquidity was in a deficit of Rs 2,645 crore on Thursday, the latest data by the RBI showed

The policy, called fixed rate liquidity operations, will help banks manage their needs better, several bankers proposed to the RBI in meetings held over the last few months

Liquidity jumps on government spending and surplus transfer; RBI gets ₹1.7 tn bids at 7-day VRRR, with cut-off at 5.47%; experts see preference for shorter operations

The Reserve Bank of India will conduct a seven-day variable rate reverse repo (VRRR), for Rs 1 trillion ($11.64 billion) on Friday, its first such operation since November-end

RBI Governor also called banks and primary dealers for their active roles to improve liquidity and pricing for participants like cooperative banks, pension and provident funds with smaller deal sizes

RBI has moved liquidity into the surplus side from a deficit four months ago, and some experts feel it may be preparing for monetary transmission before it cuts the repo rate again next week

Reserve Bank of India is scheduled to meet bank economists on April 3 to take feedback on proposed revisions

The reversal of rules follows the central bank's decision to defer proposals to increase the capital that banks set aside for new project loans and liquidity they hold for digital deposits

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Indian banks' loan growth has moderated for six straight months through December as the liquidity constraints forced lenders to focus on boosting deposits, instead of issuing credit

The cash injection has also led to a decline in the weighted average call rate, which represents banks' overnight borrowing costs

Brokerages believe central bank's actions set the stage for a repo rate cut in February