The liquidity shortage in banks has significantly decreased to about Rs 20,000 crore, the lowest level since the December deficit.

According to Reserve Bank of India (RBI) data, the banking system's liquidity deficit decreased significantly from Rs 1.1 lakh crore on March 3 to Rs 20,416.70 crore on March 4. Experts attribute this to inflows from USD/INR Buy/Sell swap auctions, for which the first leg of settlement took place on March 4. The liquidity shortfall has dropped by about Rs 89,000 crore, from Rs 1.01 lakh crore on March 3 to Rs 20,417 crore on March 4. Mataprasad Pandey, Vice President of Arete Capital Service, stated that this sum is more in line with the liquidity anticipated on the settlement day (March 4) of the three-year USD/INR Swap auction that was place on February 28. Since going into deficit in December 2024, the liquidity shortage has never been this low. Economists estimated that the sale would inject liquidity into the banking sector in the range of Rs 85,000 to Rs 88,000 crore. In February 2025, the central bank carried out a $10 billion buy/sell swap for three years, and on March 3, the first leg of settlement was completed. After injecting $5.1 billion through a six-month swap on January 31, this was the central bank's second swap auction. In contrast to daily VRR auctions, the central bank's USD/INR Buy/Sell swap auction, which has a longer duration, offers the banking system stable liquidity. In order to meet short-term liquidity needs and alleviate liquidity stress, banks can borrow money at market-determined rates through the RBI's daily Variable Repo Rate (VRR) auction.