Key Points
The RBI's recent 25,000 crore VRR auction aims to mitigate liquidity pressures from overseas capital outflows and festive cash demands..
This follows the central bank's policy shift to a neutral stance, indicating more tolerance for easier liquidity conditions to support the banking system.ReutersRBI..
Mumbai: The Reserve Bank of India's move on Friday to inject funds into the banking system despite the prevalence of a headline liquidity surplus reflects an adroit strategy by the central bank to ensure that recent overseas outflows from local capital markets and festival-related cash withdrawals do not drive up banks' cost of funds, analysts said...
"The second aspect is that some part of the recent decline in liquidity surplus is because of the GST outflows while the third reason is that we are entering the Diwali phase which is typically a phase of very cash-heavy demand," he said.. With foreign portfolio investors having pulled out funds worth a record $9.6 billion, or Rs 80,954 crore, from Indian equity markets so far in October, the rupee has faced pressure, weakening past the 84/$1 mark for the first time earlier this month..
On Wednesday, surplus liquidity in the banking system - as measured by absorption of funds by the RBI - dropped to a one-month low of Rs 57,428.30 crore, central bank data showed..
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