Reserve Bank of India has injected ₹48,014 crore into the banking system through a seven-day Variable Rate Repo (VRR) auction, aiming to address short-term liquidity pressures arising from tax-related outflows.
VRR Auction Details
The liquidity infusion was conducted at a cut-off and weighted average rate of 5.26%, with banks accessing funds through a market-driven bidding process.
Notably, the amount infused was lower than the notified auction size of ₹1.50 lakh crore, indicating relatively subdued demand for funds despite tightening liquidity conditions.
VRR auctions are a key liquidity management tool used by the RBI to inject short-term funds while allowing interest rates to be determined competitively.
Liquidity Tightening Due to Tax Outflows
System liquidity witnessed a sharp contraction primarily due to advance tax payments.
- Liquidity surplus declined to ₹75,483.63 crore on March 16
- Down from ₹2.08 lakh crore on March 15
The steep drop within a short span reflects significant fund outflows from the banking system. Additional pressure is anticipated from upcoming GST-related payments, which could further tighten liquidity in the near term.
Ongoing Liquidity Management Measures
The RBI has been actively managing liquidity conditions through multiple instruments. Since January 2026, it has infused approximately ₹3.50 lakh crore of durable liquidity via open market operations (OMOs), primarily through government securities purchases.
These interventions have helped stabilise short-term funding costs, with overnight rates remaining below the policy repo rate. The central bank continues to calibrate liquidity to ensure orderly market functioning.
Summary
The RBI injected ₹48,014 crore through a VRR auction to address tightening liquidity caused by tax outflows. Despite a lower-than-notified uptake, the move forms part of broader liquidity management efforts, including significant OMO infusions, to maintain stability in the banking system and money markets.
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