System liquidity surplus persisted in April and May says RBI

Reserve Bank of India or RBI stated in a latest monthly update that System liquidity surplus persisted in April and May (up to May 19, 2025), supported by the Reserve Bank's proactive liquidity management measures. However, the build-up of government cash balances - driven by advance tax payments and GST outflows - and an increase in currency in circulation (CiC) exerted some pressure on liquidity conditions in the second half of April. The Reserve Bank injected a cumulative amount of Rs 1.68 lakh crore into the banking system through one main 14-days variable rate repo (VRR) and twenty- one fine-tuning VRR operations with maturities ranging from 1 to 4 days during April 16 to May 19, 2025. Reflecting these developments, the average daily net absorption under the liquidity adjustment facility (LAF) stood at Rs 1.52 lakh crore during April 16 to May 19, 2025, markedly higher than Rs 0.26 lakh crore recorded during March 16 to April 15, 2025. In the current financial year (up to May 19, 2025), the Reserve Bank has infused liquidity to the tune of Rs 2.65 lakh crore through purchases under open market operation (OMO) and a 43-day term VRR auction.

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