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Monetary Management and Financial Intermediation 123

b. Term liquidity facility of `50,000 crore to ramp up COVID-related healthcare infrastructure
and services in the country;

c. Special Long-Term Repo Operations (SLTRO) for small finance banks of `10,000 crore
to support small business units, micro and small industries, and other unorganised sector
entities adversely affected during the second wave of the pandemic. SLTRO scheme was
subsequently made on-tap and was extended till December 31, 2021.

d. On-tap liquidity window of `15,000 crore for contact-intensive sectors.

e. Extension of On tap Targeted Long-Term Repo Operations (On tap-TLTRO) till 31
st
December 2021.

4.9 A secondary market G-sec acquisition programme (G-SAP) - which was announced
during the year added to the surplus liquidity during the period. G-SAP involves upfront
commitment to purchase a specific quantum of government securities with a view to enabling
a stable and orderly evolution of the yield curve. RBI purchased G-secs (including state
development loans) amounting to `1 lakh crore under G-SAP 1.0 and `1.2 lakh crore under
G-SAP 2.0.

4.10 The gradual normalisation of liquidity management operations in sync with the revised
liquidity management framework was the key feature of liquidity management in 2021-22. The
14-day Variable Rate Reverse Repo (VRRR) auctions were deployed as the main operation
under the Liquidity Adjustment Facility (LAF). Further, the cash reserve ratio (CRR) which
was reduced by 100 basis points (bps) in March 2020, was gradually raised to its pre-pandemic
level of 4 per cent by May 2021. To manage the liquidity conditions, variable rate reverse
repo auctions of varying maturities were conducted apart from the VRRR operations conducted
every fortnight. The size of 14 day VRRR was gradually enhanced to `7.5 lakh crore by end-
December 2021. During 2021-22 so far, average daily net absorptions under LAF amounted to
`6.7 lakh crore.

4.11 During 2021-22 so far, due to the surplus liquidity conditions, call money rate generally
traded below the reverse repo rate - the lower bound of the liquidity adjustment facility
(LAF) corridor during the year (Figure 7). The weighted average call rate (WACR) - the
operating target of monetary policy - traded 13 bps below the floor of the corridor on an
average during the year so far. It was only in November 2021, that the WACR drifted back
slightly within the corridor.

4.12 With RBI becoming the major counterparty for banks, there was a shrinkage in inter-
bank trading activity - average daily volume in the call money market declined to `9,077
crore in December 2021 from `10,126 crore in March 2021. Interest rates on longer-term
money market instruments like 91-day Treasury Bills (T-Bills), 3-month Certificates of
Deposit (CDs) and Commercial Papers (CPs) generally traded above the reverse repo rate
during the year.