Mumbai: The Reserve Bank of India (RBI) will carry out a 7-day variable rate repo auction worth ₹1 lakh crore on December 15, marking the first time in six months that the central bank will infuse liquidity into the banking system through this route.
The RBI has taken the decision to inject liquidity into the banking system in light of outflows on account of advance tax and goods and service payments.
“The 14-day VRRR auction conducted on December 01, 2023 and subscribed for ₹22,468 crore is maturing and allowed to be reversed on December 15, 2023,” read a release on the RBI’s website on Thursday.
“Furthermore, in view of likely outflows from the banking system on account of advance tax and GST payments, it has been decided to conduct a 7-day variable rate repo auction on December 15, 2023, Friday.”
The last time that the RBI had conducted a variable rate repo auction was on June 19. Over the past year, the central bank has taken steps to drain out excess liquidity from the banking system.
However, liquidity has tightened significantly over the past couple of months due to demand for currency during the festive season, the RBI’s actions in currency markets and tax payments. As on December 13, the liquidity deficit was at ₹38,774.92 crore, RBI data showed.
