RBI Injects ₹1.41 Trillion Into Banking System Through 7-Day VRR Auction to Ease Liquidity Deficit

The Reserve Bank of India (RBI) injected ₹1.41 trillion into the banking system on June 24 through a seven-day Variable Rate Repo (VRR) auction. The funds were provided at a cut-off rate of 5.26 per cent, which was also the weighted average rate for the auction. 

The operation came as liquidity conditions tightened in the banking system following large tax-related outflows. VRR auctions are used by the central bank to provide short-term funds to banks against eligible securities. 

Banking Liquidity Slips into Deficit 

Data released by the RBI showed that banking system liquidity moved into a deficit of ₹1.99 lakh crore on June 22. A day earlier, the system had recorded a surplus of ₹30,685 crore. 

The shift was largely linked to Goods and Services Tax (GST) collections and advance tax payments. Such outflows transfer funds from bank deposits to government accounts, reducing the cash available within the banking system. 

Overnight Rates Rise Above Repo Rate 

The liquidity deficit was reflected in money market rates. The weighted average call money rate was trading at 5.43 per cent, around 18 basis points above the RBI’s repo rate. 

Rates in the tri-party repo (TREPS) market also remained above the policy rate, trading about 5 to 7 basis points higher. Higher overnight rates generally indicate tighter liquidity conditions and increased demand for short-term funds. 

Multiple Auctions Held in Recent Days 

The latest auction follows a series of liquidity operations carried out by the central bank over the past several sessions. RBI data showed that around ₹2.43 trillion has been infused through VRR auctions of different maturities since mid-June. 

These included ₹36,300 crore through an overnight VRR auction on June 23, ₹16,750 crore through a three-day auction on June 20, and ₹72,300 crore through two auctions conducted on June 18.  

Earlier, the RBI injected ₹89,440 crore through a seven-day VRR auction on June 16 and ₹28,220 crore through an overnight auction on June 15. 

Read More: NPCI Plans Unified E-Mandate Tracking Feature Across All UPI Payment Apps! 

Conclusion 

The latest liquidity injection comes after banking system liquidity turned negative due to tax-related outflows. The RBI has continued to use short-term repo auctions to provide temporary funds to banks and address liquidity pressures in the money market. 

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