RBI doubles liquidity injection to Rs 1.5 lakh crore ahead of tax payments

Core Insights - The Reserve Bank of India has doubled its liquidity injection plan to Rs 1.5 lakh crore through variable repo rate auction to ensure comfortable liquidity during advance tax payments [7] - The increase in variable repo rate (VRR) aims to mitigate transient liquidity tightness expected after advance tax and GST payments [7] - More than Rs 2 lakh crore of liquidity is anticipated to be drained due to advance tax payments on the 15th and GST payments on the 20th [7] Liquidity Management - The central bank's actions are designed to pre-empt any potential liquidity shortage resulting from advance tax payments [7] - A dollar-rupee buy-sell swap will be conducted to infuse durable rupee liquidity [7] - The VRR will help maintain overnight rates close to the repo rate, ensuring stability in the financial system [2][7] Economic Outlook - System liquidity is expected to rise towards the end of the month as government expenditure increases [7] - The measures taken by the Reserve Bank of India reflect a proactive approach to managing liquidity in the banking system during critical tax payment periods [7]