Banking liquidity in deficit after 2 months tax outflows, GST payments

Banking system liquidity slipped into deficit after two months due to tax and GST outflows, though experts expect a return to surplus in early April

The net liquidity in the banking system fell into deficit mode after two months on the back of advance tax outflows and GST payments estimated to be around ₹3 trillion. The last time the banking system liquidity was in deficit was on January 21 of the current year.

 

The net liquidity was in a deficit of ₹65,395 crore on Sunday, the latest data by the Reserve Bank of India showed.

 

“The liquidity drain is because of advance tax outflows worth ₹2 trillion and GST payments of around ₹1 trillion,” said the treasury head at a private bank.

 

Experts said core liquidity remains ample, and system liquidity is expected to return to surplus in the first week of April, supported by government expenditure.

   

“The core liquidity is still high at around ₹5 trillion. This is a temporary deficit and it should be back to surplus after government expenditure kicks in in the first week of April,” said Gaura Sen Gupta, economist at IDFC First Bank.

 

Consequently, the RBI conducted an overnight variable rate repo auction worth ₹1 trillion. The central bank received bids worth ₹79,256 crore against the notified amount.

 

The RBI infused the notified amount at a weighted average rate of 5.26 per cent. 

The central bank will conduct another 3-day VRR auction on Tuesday aiming to infuse ₹1 trillion.