RBI receives tepid demand at seven-day variable rate repo auction

The Reserve Bank of India (RBI) witnessed a tepid demand at the 7-day variable rate repo (VRR) auction. Banks bid for ₹16,363 crore at the auction, against the notified amount of ₹50,000 crore.

 

The net liquidity in the banking system was in a surplus of ₹1.56 trillion on Thursday, according to latest data by the RBI.

 

The last such auction for infusing liquidity was carried out on October 30, for ₹1 trillion. Market participants said the RBI conducted the auction as the surplus liquidity may narrow in the coming days due to goods and services tax (GST)-related outflows. The RBI’s VRR operations are intended to infuse liquidity from the financial system and anchor short-term money market rates closer to the policy repo rate.

 

 

The marginal standing facility (MSF) rate, set 25 basis points (bps) above the policy repo rate, is the ceiling of the liquidity adjustment facility corridor. The standing deposit facility (SDF) rate, which is 25 bps below the repo rate, is the floor. The policy repo rate is currently at 5.5 per cent.

 

The weighted average call money rate (WACR) was 5.52 per cent on Friday, compared to 5.41 per cent on Thursday.

 

The RBI has also been active in the government bond market via bond purchases aiding the banking system liquidity. The RBI bought bonds worth ₹14,810 crore during the week ended November via the NDS-OM platform, latest data by the central bank showed. During the week prior to that, the RBI had bought over ₹12,000 crore worth of bonds.

 

Meanwhile, the government sold ₹30,000 crore worth of government bonds at the weekly auction. The cut-off yield on the 5-year bond was set at 6.21 per cent, while that on the 50-year bond was set at 7.39 per cent.