RBI Injects ₹48,014 Crore Liquidity Through VRR Auction into Banking System

The Reserve Bank of India has infused short-term liquidity into the banking system through a variable rate repo auction as system liquidity conditions tightened following large tax-related outflows. The move comes at a time when surplus liquidity has seen a sharp decline in recent days. 

RBI Conducts VRR Auction to Support Liquidity 

The central bank injected ₹48,014 crore through a seven-day variable rate repo (VRR) auction, where banks bid for funds at market-determined rates. The funds were infused at a cut-off and weighted average rate of 5.26%. 

The amount injected was significantly lower than the notified size of ₹1.50 lakh crore, indicating relatively muted demand for funds despite tightening liquidity conditions.  

VRR auctions are typically used by the RBI to provide short-term liquidity while allowing interest rates to be determined through competitive bidding. 

Liquidity Declines Sharply Due to Tax Outflows 

Banking system liquidity has seen a notable drop due to advance tax payments. The liquidity surplus stood at around ₹75,483.63 crore as of March 16, compared with ₹2.08 lakh crore on March 15, reflecting a sharp contraction within a day. 

Further pressure on liquidity is expected with upcoming goods and services tax (GST) outflows, which could tighten conditions further in the near term. 

RBI Continues Broader Liquidity Management Measures 

In recent months, the RBI has taken multiple steps to maintain adequate liquidity in the system. Since January 2026, it has infused around ₹3.50 lakh crore of durable liquidity through open market operations (OMO) involving purchases of government securities. 

These actions have helped keep short-term funding costs in check, with overnight rates trading below the repo rate. The central bank continues to calibrate liquidity to ensure stability in money markets. 

Read More: India Sees Fewer Rate Hikes Under Inflation Targeting Regime: SBI Report! 

Conclusion 

The latest VRR auction reflects the RBI’s ongoing efforts to manage short-term liquidity fluctuations amid tax-related outflows. With further liquidity pressures expected, the central bank’s actions remain focused on maintaining stability in the banking system and keeping short-term interest rates under control. 

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