Making Sense

System turned Liquidity surplus with daily absorption seen at 41K cr and system liquidity ( adjusted for excess CRR balances) at inr 7400 crs. RBI announced 1 day VRRR auction of Inr 100K crore for which the amount accepted was ~ 73K crore and announced a second 1 day VRRR auction of Inr 100K crore today.  Reckon RBIs intention is to maintain the WACR at the Repo Rate and today's WACR ( Call / Treps and Repo) of 6.34% is not in sync and hence a second operation was announced as such.

System Liquidity worsened from 101K crs on Feb 6, 2024 to 196K crs as of yesterday. The additional liquidity deficit can be explained by Change in CRR maintained with RBI to the tune of 7K crs, T-Bill issuance of 27K crs, SDL Auction of 27K crs and Excise duty Payments of 26K - 30K crs. RBI will conduct a Variable Rate Repo operation of 175K crore as 2 operations - Repo of Inr 250K cr and Reverse Repo of 18.75K cr mature today. So the Net Delta from RBI operations is -56.25K crs.  In the week ahead, 96,960 crs of T-bill/Gsec/SDL auction is scheduled and then the GST payments which will strain the system further. Government spending will be a key swing factor for system liquidity.  I think RBI will announce more fine tuning repo operations to smoothen the frictional mismatches in liquidity.