RBI injects ₹1 trillion in first repo auction in three months as rates climb
The Reserve Bank of India conducted a ₹1 trillion seven-day repo auction, its first in over three months, as interbank rates hovered near the policy ceiling.
On Monday, the Reserve Bank of India launched a seven-day variable-rate repo auction, injecting ₹1 trillion ($10.53 billion) into the market - its first liquidity infusion in more than three months. The operation attracted over ₹1.5 trillion in bids, reflecting strong demand ahead of a sizable goods-and-services-tax outflow and a holiday-driven cash need. The banking sector’s liquidity surplus has contracted to below ₹2 trillion, representing 0.7% of deposits, after months of excess liquidity from diaspora inflows that had pushed asset prices higher.
Interbank short-term borrowing rates have surged following the RBI’s first rate increase in nearly four years and signals of further tightening to combat rising inflation. Sakshi Gupta of HDFC Bank said the infusion addresses volatility in liquidity conditions, while noting that further bond sales or FX swaps may not be required. The weighted average call money rate briefly rose above the Marginal Standing Facility level, underscoring tightening pressures.
Why it matters
The RBI's liquidity injection signals active management of money markets to curb inflation and stabilize short-term rates.
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