The central bank accepted bids aggregating ₹50,001 crore from banks at a weighted average rate of 5.58 per cent
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DANISH SIDDIQUI
Liquidity in the the banking system seems to have come under strain following GST-related outflows, with the Reserve Bank of India (RBI), in a surprise move, conducting a two-day variable rate repo (VRR) auction to infuse liquidity amounting to ₹50,000 crore.
Against the notified amount of ₹50,000 crore, banks put in bids aggregating ₹71,902 crore for drawing liquidity from the RBI.
The central bank accepted bids aggregating ₹50,001 crore from banks at a weighted average rate of 5.58 per cent.
V Rama Chandra Reddy, Head – Treasury, Karur Vysya Bank, said: “With the surprising VRR auction, the RBI has demonstrated its active response to evolving liquidity conditions and movements in overnight rates. While the banking system liquidity is at ₹2.43 lakh crore, nearly ₹2 lakh crore is locked until next Friday in VRRR (variable rate reverse repo), effectively leaving only around ₹42,000 crore as daily usable liquidity. The recent GST outflows have further strained the system.”
Reddy noted that banks had parked higher amounts in the previous VRRR auction, anticipating that despite these outflows, rates would remain below the repo rate.
Today’s action by the RBI is a welcome move, signaling that it remains committed to its current policy stance and is not pivoting away, he added.
The banking system’s liquidity transitioned to a surplus liquidity towards March-end 2025. The RBI, in its latest monthly bulletin, noted that system liquidity remained in surplus during June and July (up to July 18, 2025), driven by higher government spending, lower-than-expected GST collections and a decline in currency in circulation.
Reflecting these developments, the average daily net absorption under the liquidity adjustment facility (LAF) stood at ₹3.13 lakh crore during the period June 16 to July 18, 2025, exhibiting a significant increase over ₹2.39 lakh crore during the period May 16 to June 15, 2025.
Published on July 23, 2025
