WACR, which is the management target of RBI’s monetary policy, was at 6.53% the previous day. WACR is generally smooth when the liquidity position in the banking system is in a surplus position.
Money market dealers on Monday blamed the high WACR for the skewed distribution of liquidity in the banking system, with some state-owned banks said to be experiencing shortages.
“Generally lending public sector banks are facing deficit. So there is no lending going on, which may be the reason why WACR is 18 basis points higher than the repo rate”, said a bond trader with a primary dealership.
The liquidity of the banking system as measured by the net absorption of funds by the RBI was a surplus of Rs. 79,806 crore, as of September 29, central bank data showed. Banking system liquidity was in deficit for a while due to advance tax and GST payments this month, but has returned to surplus mode due to increase in government spending, traders said.
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The Reserve Bank of India will tomorrow conduct a 4-day Variable Rate Reverse Repo Auction (VRRR) of Rs. 1.75 lakh crore.
VRRR auctions are one of the many tools that the RBI can use to remove excess liquidity in the banking system.
The yield on the benchmark 10-year government security was largely steady, closing at 6.75% on Monday, up from 6.77% the previous day, CCIL data showed.
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