Banks reluctant to park funds with RBI in long-term VRRR ahead of GST outflows
Banks have turned reluctant to park their funds with the Reserve Bank of India (RBI) for a longer tenure in the variable rate reverse repo auctions because, according to experts, the lenders want to maintain higher level of funds ahead of the goods and services tax (GST) outflow.
The GST outflows usually take place on the 20th day of every month. As per market participants, the GST outflows on July 20 could be between Rs 1.50 lakh crore and Rs 1.75 lakh crore.
“Banks avoid parking for more number of days in variable rate reverse repo (VRRR) auction due to the dynamic nature of liquidity. This 14-day VRRR also includes GST payment due date, that makes it even sensible for banks to be more cautious from the liquidity management point of view,” said Mataprasad Pandey, vice-president of Arete Capital Service.
