Tech glitch on e-Kuber hits demand at RBI's 30-day liquidity mop-up auction

A technical glitch on the Reserve Bank of India’s e-Kuber portal led to weaker-than-expected demand at the central bank’s 30-day variable rate reverse repo (VRRR) auction for a notified amount of ₹7 trillion on Monday, market participants said.

The e-Kuber platform, which is usually used for such auctions, faced a technical issue, following which the RBI shifted the bidding to another platform. Some banks were caught unaware by the change and could not participate, participants said.

Auctions are conducted on the electronic platform called e-Kuber, the Core Banking Solution (CBS) platform of the RBI.

A mail sent to the RBI seeking a comment on the issue remained unanswered until press time.

The RBI received bids worth ₹2.59 trillion against the notified amount of ₹7 trillion at the 30-day auction. Market participants had expected bids of up to ₹5 trillion, making the actual response well short of expectations. The 30-day VRRR auction had an option for premature reversal, which was a first for a VRRR auction.

“There was also some system-level glitch. While RBI wanted to mop up ₹7 trillion, the market expectation was that they will get up to ₹5 trillion through the auction, but they got just ₹2.59 trillion, and it was likely because of the glitch,” said a senior banker at a private bank.

The central bank announced a ₹5 trillion overnight VRRR auction after the first auction.

Bids at the overnight VRRR auction were stronger at ₹3.53 trillion against the notified amount.

Net liquidity surplus in the banking system stood at a record ₹11.16 trillion on Sunday, the latest RBI data showed. Net liquidity was in a surplus of ₹10.73 trillion and ₹11.12 trillion on Friday and Saturday, respectively.

Apart from the glitch, banks were also cautious about parking funds for the long term due to the upcoming GST and advance-tax outflows.

“There will be GST and advance-tax outflows in the coming days, which should suck out some liquidity for some time. So, we’ll have to see how liquidity evolves from here,” said a senior banker.

The RBI plans to conduct another overnight VRRR auction worth ₹5 trillion on Tuesday.

The overnight weighted average call rate (WACR) — which is the operating target of monetary policy — was trading below the Standing Deposit Facility (SDF) rate and settled at 4.97 per cent, against the previous close of 3.87 per cent on Saturday. The overnight rate had settled at 4.94 per cent on Friday.

The SDF rate, which currently stands at 5 per cent, is the interest rate at which banks park their surplus funds with the RBI without providing collateral. It forms the lower bound of the RBI’s policy corridor, with the repo rate in the middle and the marginal standing facility (MSF) rate at the upper bound.

Banks parked ₹2.46 trillion under the central bank’s SDF window on Sunday, the latest data showed.

Strong inflows under the central bank’s swap scheme have led to a surge in banking system liquidity. Market participants have suggested sell/buy swaps to the RBI to absorb the excess liquidity and align the overnight rate with the repo rate. The policy repo rate currently stands at 5.25 per cent.

“The RBI will look at other measures to absorb the liquidity, as banks are not willing to participate in long-term VRRR,” said the treasury head at a private bank. “Banks have suggested sell/buy swap, which we are expecting will be announced before MPC,” the person added.