Surplus liquidity in the banking system shrank to ₹84,154.75 crore due to monthly GST outflows. This is akin to a fine-tuning exercise to manage call rates near the repo rate, as monthly tax outflows drew surplus liquidity out of the banking system, money market experts said.
The RBI injected funds worth ₹25,000 crore via a variable rate repo auction (VRR) to ensure that recent overseas outflows from local debt and equity do not drive up banks’ cost of funds, analysts said. This is the second such auction that the RBI has conducted post its change in stance to neutral from withdrawal of accommodation.
On Thursday, surplus liquidity – as measured by absorption of funds by the RBI – dropped to a one-month low of ₹84,154.75 crore, central bank data showed.
“The RBI has been very flexible and quick to manage liquidity. I am also expecting some VRR auctions to happen around mid December when there are advance tax outflows,” said Vikas Goel, MD and CEO at PNB Gilts. “The RBI wants to keep durable liquidity positive and roughly about 1% to 1.2% of NDTL, to make sure that the call rates don’t move away from the repo rate,” he said.
In the auction on Friday, the RBI received bids worth ₹35,420 crore from banks versus the notified amount of ₹25,000 crore, reflecting the need for funds from lenders.So far in November, the rupee has weakened nearly 0.5% to 84.45/$1 and foreign investors have sold $4 billion from Indian stocks and bonds, depository data showed. Likely intervention by the RBI has capped the rupee from depreciating further, currency dealers said.
