India’s Bank Liquidity Turns Deficit as RBI Steps Up Repo Support

Overview

• Net system liquidity slipped into a deficit of Rs 65,395 crore, reversing a two‑month surplus, according to the Reserve Bank of India.
• Market participants linked the squeeze to scheduled advance tax and goods and services tax payments that pulled large sums out of banks.
• The RBI ran an overnight variable rate repo of Rs 1 trillion and accepted Rs 79,256 crore of bids at a 5.26% weighted rate, using the tool to supply short‑term funds against government bonds.
• The central bank flagged another three‑day repo operation of up to Rs 1 trillion as the weighted call rate edged up to 5.34% and banks found cheaper funding in the tri‑party repo market near 5.05%.
• Dealers expect government spending later in the month to send cash back into the system, so many banks are only borrowing what they need for daily operations for now.