RBI Injects Rs 81,590 Crore into Banking System via 3-Day Variable Rate Repo Auction
RBI Injects Rs 81,590 Crore of Transient Liquidity into Banking System
The Reserve Bank of India (RBI) on Friday injected Rs 81,590 crore of transient liquidity into the banking system through a three-day variable rate repo (VRR) auction. Transient liquidity refers to 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.
The RBI released funds at a 5.26 percent cut-off rate. Despite the injection, the demand for funds still remained lower than the notified amount of Rs 1 lakh crore. However, demand from banks in Friday's auction was higher compared to the previous auction conducted on May 21.
| Auction Date | Notified Amount | Demand from Banks |
|---|---|---|
| May 21 | Rs 1 lakh crore | Lower than May 21 |
| Friday | Rs 1 lakh crore | Higher than May 21 |
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 call money rates. Money market experts anticipate that the RBI would announce another VRR auction to manage evolving liquidity conditions.
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