The net liquidity in the banking system fell into deficit mode after two months on the back of advanced tax outflow and GST payments estimated to be around Rs 3 trillion.The last time the banking system liquidity was deficit was on January 21 of the current year.
The net liquidity was in a deficit of Rs 65,395 crore on Sunday, latest data by the Reserve Bank of India showed.
"The liquidity drain is because of advanced tax outflow worth Rs 2 trillion and GST payment of around Rs 1 trillion,' said the treasury head at a private bank.
Experts said core liquidity remains ample, and system liquidity is expected to return to surplus in the first week of April, supported by government expenditure.
"The core liquidity is still high at around Rs 5 trillion. This is temporary deficit and it should be back to surplus after government expenditure kicks in in First week of April,' said Gaura Sen Gupta, Economist at IDFC First Bank.
Consequently, the RBI conducted overnight Variable Rate Repo auction worth Rs. 1 trillion. The central bank received bids worth Rs. 79,256 crore against the notified amount. The RBI infused the notified amount at a weighted average rate of 5.26 per cent. The central bank will conduct another 3-day VRR auction on Tuesday aiming to infuse Rs. 1 trillion.
-- Anjali Kumari, Business Standard
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