To help understand: around 1.18 lakh crore was parked in Variable Rate reverse repo at 4.39%, maturing Thu. Means banks have parked with RBI 1.18 lakh cr. at 4.39%

RBI is not offering another variable rate RR, which means banks have to park only at fixed rate RR = 4%. https://twitter.com/CNBCTV18Live/status/1249332580370894848

Banks get a lower interest rate on their excess cash of 0.4%.

You would think: Oh man, banks will go and lend anywhere for more returns!

You would be wrong.

Because banks have parked a whopping 5.76 lakh crores, literally, quite as much as our entire fiscal deficit in size, back with the RBI at 4% in the fixed rate Reverse repo. (This is separate from the 1.18 lakh in variable rate RR)

Banks are simply too scared to lend.

RBI will have to come in and directly buy govt bonds and commercial paper, because banks are just too scared to do so. You can give banks as much money as you want, they won't lend it.

(They aren't even cutting interest rates, FFS. )