RBI Infuses ₹72,300 Crore Through VRR Auctions to Ease Liquidity Tightness

The Reserve Bank of India (RBI) on Wednesday injected ₹72,300 crore into the banking system through two variable rate repo (VRR) auctions to address short-term liquidity pressures caused by advance tax payments. The central bank infused ₹50,016 crore through a two-day VRR auction at a cut-off rate of 5.26 per cent, followed by another ₹22,284 crore through a second two-day auction. VRR auctions enable banks to borrow short-term funds from the RBI against eligible securities when liquidity conditions tighten.

The move came after surplus liquidity in the banking system sharply declined to around ₹23,881 crore on June 16 from nearly ₹1.51 trillion a day earlier, according to RBI data. Market experts attributed the decline primarily to advance tax outflows, which temporarily drained funds from the banking system. The RBI has frequently used VRR auctions to manage such short-term liquidity mismatches arising from tax-related payments.

Liquidity conditions are expected to remain under pressure with upcoming Goods and Services Tax (GST) payments. Experts believe the RBI may conduct additional VRR auctions in the coming days to ensure adequate liquidity and keep overnight borrowing costs aligned with the policy repo rate. On Wednesday, the weighted average call money rate stood at 5.37 per cent, above the RBI’s repo rate of 5.25 per cent, highlighting the need for continued liquidity support.

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