Currency in circulation (CIC) increased by Rs 439 billion to Rs 29.88 trillion in the week ending November 5, 2021, owing to festive demand. According to Kotak Institutional Equities research, the current CIC outstanding is 15.1% of FY2021 nominal GDP.
The system liquidity surplus improved last week amidst heavy redemptions and reduction in Cash Reserve Ratio (CRR) balances. On a W/W (week on week) basis, the average liquidity surplus last week increased to Rs 8,111 billion as against an average surplus of Rs 7,376 billion the previous week.
Tracking the improvement in liquidity surplus, the average overnight rates moved lower by 10bps W/W to 3.27%. Further, RBI’s rapid liquidity management through variable rate reverse repo (VRRR) has led to a surge in the weighted average reverse repo rate which has increased by 42bps from mid-September to 3.79% currently. The system liquidity surplus is expected to moderate this week as GST collections and auction outflows are expected to outweigh the CIC payback and government spending.
