RBI to Conduct Three-Day Rs 1 Lakh Crore Variable Rate Reverse Repo Auction on May 22

RBI to Conduct Three-Day Variable Rate Repo Auction

The Reserve Bank of India (RBI) has announced that it will conduct a three-day variable rate repo auction for a notified amount of Rs 1 lakh crore on May 22. The auction will take place between 9:30 AM and 10 AM, with the reversal of these funds scheduled to occur on May 25.

The decision to conduct the auction was made after a review of the current and evolving liquidity conditions in the banking system. The RBI noted that the liquidity surplus in the banking system has narrowed in recent days, particularly following the goods and services tax outflows, which has led to an increase in the overnight money market rates.

As of May 20, the liquidity in the banking system is estimated to be in surplus of around Rs 1.29 lakh crore, a significant decrease from the Rs 2.58 lakh crore surplus reported on April 30, according to RBI data.

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In an effort to provide liquidity to the banking system and stabilize the rising overnight money market instrument rates, the RBI has conducted six variable rate repo auctions in May, including one on April 30. Despite the narrowing surplus of systemic liquidity, the central bank received a muted response from participants in the earlier auctions.