RBI annual report | Mopping up excess liquidity cost Rs 35,500 crore in FY22

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The Reserve Bank of India (RBI) spent more than Rs 35,500 crore on a net basis in FY22 to manage the surplus liquidity in the banking system.

The net interest outgo for the RBI on the operations it conducted via its Liquidity Adjustment Facility (LAF) amounted to Rs 35,501 crore, 98 percent higher than what it shelled out in FY21, the central bank’s report for FY22, released on May 27, said.

The RBI pays interest on the funds banks park at its reverse repo facilities—both fixed and variable rate. With the central bank having injected a record amount of liquidity following the onset of the coronavirus pandemic in 2020, the “re-balancing” began last year to ensure financial and macroeconomic stability.

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"The gradual restoration of liquidity management operations in sync with the revised liquidity management framework instituted in February 2020 was a key objective during 2021- 22," the RBI said in its annual report.

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In the first quarter of FY22, the RBI absorbed a net average liquidity of Rs 5.10 lakh crore a day. The figure rose to Rs 6.77 lakh crore in the final quarter, said the annual report which includes a review and prospects of the Indian economy. The report also offers a snapshot of the RBI’s working during the year and its vision agenda for the next year.

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