Surplus liquidity in India banks drops as advance tax outflows tighten funds despite RBI support

Surplus liquidity in India’s banking system fell steeply on June 17, even after RBI support steps. RBI data showed the surplus shrank to Rs 4,772.21 crore. It stood at Rs 23,881.21 crore on June 16. The drop came as outflows rose, led by advance tax payments.

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The June 17 surplus was the lowest since March 22, 2026, RBI numbers showed. On March 22, 2026, the system was in deficit. The deficit then was Rs 65,395.64 crore. Market participants linked the latest tightening to seasonal cash movements around tax deadlines.

RBI liquidity surplus and advance tax outflows

Experts said advance tax collections pulled funds out of the banking system. This reduced the cash cushion available with banks. They also said the RBI may step in again. More VRR, or variable rate repo, auctions may follow. The aim would be to add short-term funds and steady conditions.

RBI liquidity surplus impact on call money rate

Tighter liquidity has also affected overnight borrowing costs in the interbank market. The weighted average call money rate moved above the RBI repo rate. The repo rate is 5.25 per cent. Dealers tracked this shift as a sign of stress in very short-term funding conditions.

RBI liquidity surplus support through VRR auctions

To ease pressure, the RBI injected about Rs 1.89 lakh crore through VRR auctions. These were of different tenures over the past few days. RBI data showed Rs 72,300 crore was infused on Wednesday via two VRR auctions. Another Rs 89,440 crore came through a seven-day VRR on June 16.

The RBI also added Rs 28,220 crore using an overnight VRR auction on June 15, the data showed. Despite these operations, surplus liquidity still fell on June 17. The day’s sharp drop suggested strong tax-related outflows. Traders said further RBI operations could be used as needed to manage rates.

With inputs from PTI