RBI gave strength to banksImage Credit source: PTI
The Reserve Bank of India has taken a big step to strengthen the country’s banking system. On Tuesday, RBI has injected Rs 1,41,171 crore into the banking system. The Reserve Bank has taken this step at a time when the country’s banking system is suffering from lack of liquidity. In fact, the common man also gets the benefit of having enough money in banks.
Due to availability of money in the banking system, banks are able to easily provide loans to the general public. At present there is a shortage of cash in the banking system. According to the data, the surplus of Rs 30,685.11 crore on June 21 reduced to a deficit of Rs 19,971.89 crore on June 22. Therefore, in order to meet this shortfall, the Reserve Bank has put this amount in the banks at a cut-off average of 5.26 percent.
What is VRR system?
The Reserve Bank of India has transferred this amount to the banks through VRR auction. VRR auction is a means of RBI, through which it aims to balance the temporary shortage or excess of cash in the banking system. According to experts, this decrease in cash has come due to withdrawal of money from the banking system due to Goods and Services Tax (GST) payment. The liquidity deficit has put pressure on overnight money market rates, where the weighted average call money rate stood at 5.43 per cent, which is 0.18 per cent higher than the RBI’s repo rate.
How will the common man benefit?
When banks have enough money in the country, it becomes easier for banks to distribute loans. In this way banks are able to fulfill the shortfall of corporate and retail loans. When the bank has money and the bank is able to distribute maximum loans, then liquidity in the market increases. The benefits of which are visible from the economy to the common man. To reduce the liquidity pressure in banks and keep overnight money market rates under control, the central bank has infused temporary cash of about Rs 2.43 lakh crore through VRR auctions of various tenures in the last few days. According to RBI data, the RBI raised Rs 36,300 crore through the overnight VRR auction on Monday, Rs 16,750 crore through the three-day VRR auction on Friday, Rs 72,300 crore through two VRR auctions on Wednesday, Rs 89,440 crore through the seven-day VRR auction on June 16 and Rs 89,440 crore through the overnight VRR auction on June 15. Rs 28,220 crore were invested through this.
