Understanding Liquidity Trends and RBI's Strategies in the Banking System
| Aspect | Details |
|---|---|
| Event | RBI's Variable Rate Repo (VRR) Auction |
| Date | Friday |
| Bid Amount | Rs 1.6 trillion |
| Notified Amount | Rs 1 trillion |
| Weighted Average Rate | 6.62% |
| Liquidity Trend (June) | Surplus: Rs 30,000 crore (June 3), Rs 50,000 crore (June 4) |
| Deficit: Rs 64,500 crore (June 16), Rs 98,612 crore (June 17), Rs 1.5 trillion (June 19) | |
| RBI's Strategy | Maintain system liquidity in deficit mode to avoid excess liquidity |
| May's Cash Squeeze | Liquidity deficit exceeded Rs 1 trillion, peaked at Rs 2.32 trillion (May 23) |
| RBI's Relief Measures (May) | Infused Rs 9 trillion through 11 VRR auctions (highest in the current calendar year) |
| Banks' Response (May) | Increased issuance of Certificates of Deposit (CDs): Rs 50,000 crore (vs Rs 32,860 crore in April) |
| Repo Auctions | Mechanism to inject liquidity into the banking system |