RBI Infuses Over ₹1.41 Lakh Crore to Stabilize Banking Liquidity

In a significant move to stabilize the banking sector, the Reserve Bank of India has injected over ₹1.41 lakh crore through a seven-day variable rate repo auction. This action comes in response to a liquidity deficit caused by GST payments, which has pressured overnight money market rates. By implementing these liquidity measures, the RBI aims to ensure that credit continues to flow smoothly and prevent economic slowdowns. The central bank regularly employs various monetary tools to manage short-term liquidity challenges, including VRR auctions and government securities purchases. This proactive approach is crucial for maintaining financial stability in the face of fluctuating liquidity demands.

By Narendra Chaudhary Jun 24, 2026, 12:40 IST

RBI's Liquidity Injection

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Mumbai, June 23: On Tuesday, the Reserve Bank of India (RBI) introduced more than ₹1.41 lakh crore in temporary liquidity into the banking sector via a seven-day variable rate repo (VRR) auction.

The funds were allocated at a cut-off and weighted average rate of 5.26 percent, as per the RBI's data.

This action was prompted by a liquidity deficit of ₹19,971.89 crore in the banking system as of June 22, a significant drop from a surplus of ₹30,685.11 crore recorded on June 21.

Experts noted that the liquidity crunch was primarily due to the outflow of funds for goods and services tax (GST) payments.

The reduction in liquidity has placed pressure on overnight money market rates, with the weighted average call money rate reaching 5.43 percent, which is 0.18 percent higher than the RBI's repo rate.

When liquidity tightens excessively, particularly from GST outflows, short-term money market rates can exceed the RBI’s repo rate. By injecting liquidity, the RBI aims to alleviate short-term funding pressures and ensure that credit flows smoothly throughout the financial system, avoiding potential economic slowdowns.

The RBI regularly manages short-term liquidity deficits caused by tax outflows, advance tax payments, or seasonal credit demands through various monetary tools and market operations.

To provide substantial temporary liquidity, the central bank frequently conducts VRR auctions with tenors of 3 or 7 days. Banks can borrow funds directly from the RBI by pledging eligible government securities, offering immediate relief during liquidity deficits.

For long-term liquidity, the RBI purchases government securities from the secondary market, which injects permanent cash into the banking system, helping banks meet their Cash Reserve Ratio (CRR) requirements.

Additionally, the central bank can perform USD-INR swap auctions, temporarily acquiring US dollars from commercial banks in exchange for rupees, which increases the rupee supply in the money market and prevents spikes in overnight interest rates.