RBI Infuses ₹72,300 Crore Into Banking System Via VRR Auctions As Liquidity Surplus Narrows

The Reserve Bank of India stepped in to inject short-term liquidity into the banking system on Wednesday after surplus funds available with banks declined significantly.

The RBI injected ₹72,300 crore into the banking system through VRR auctions on Wednesday. The action followed a sharp drop in liquidity after advance tax payments led to funds moving out of the banking system.

Why Did RBI Conduct Two VRR Auctions?

To ease short-term pressure on liquidity, the RBI conducted two Variable Rate Repo auctions on Wednesday.

• In the first operation, the central bank injected ₹50,016 crore through a two-day VRR auction at a cut-off rate of 5.26%.

• A second two-day VRR auction added another ₹22,284 crore.

VRR auctions allow banks to borrow funds from the RBI against eligible securities for a specified period. RBI typically uses such auctions when liquidity tightens for a short period and banks need access to additional funds.

The latest operation followed a sharp decline in surplus liquidity after advance tax payments led to significant fund outflows from the banking system.

What Is Happening To Liquidity Conditions In The Banking System?

According to RBI data, banking system liquidity surplus stood at ₹23,881.21 crore on 16 June, down sharply from around ₹1.51 lakh crore on 15 June 2026.

Market participants attributed the decline largely to advance tax-related outflows. GST payments are due shortly, and treasury officials expect that to drain more funds from the banking system.

Why Are Overnight Rates Trading Above The Repo Rate?

In the last few days, overnight rates have traded above the RBI's policy repo rate as surplus liquidity narrowed.

On Wednesday, the weighted average call money rate stood at 5.37%, which was 12 basis points higher than the repo rate. TREPS was trading at 5.21%.

Also Read- Market Midday, 18 June 2026: Benchmarks Trade Flat

The gap between overnight rates and the repo rate has kept market participants focused on liquidity conditions and the RBI's response.

With advance tax payments already weighing on liquidity and GST-related outflows due next, traders will be watching the central bank's liquidity operations closely. Market participants expect the RBI to remain active in the VRR window if overnight funding rates continue to stay elevated in the coming days.

Source:

ET CFO