The Reserve Bank of India (RBI) on Tuesday absorbed ₹71,971 crore from the banking system through an overnight Variable Rate Reverse Repo (VRRR) auction as surplus liquidity remained elevated. The operation was aimed at absorbing excess funds from the banking system and aligning overnight money-market rates with the benchmark policy repo rate.
The RBI had notified an auction amount of ₹75,000 crore for the one-day operation. Banks submitted offers worth ₹71,971 crore, and the central bank accepted the entire amount. Both the cut-off rate and the weighted average rate were fixed at 5.24 per cent.
According to RBI data, surplus liquidity in the banking system was estimated at around ₹4.92 lakh crore as of September 21. The central bank has been conducting VRRR auctions in recent weeks to manage these liquidity conditions and keep overnight money-market rates aligned with its monetary policy framework.
The RBI has also used open market operations to withdraw liquidity. Government securities worth ₹50,000 crore were sold through an OMO on September 17, followed by another ₹25,000 crore sale on September 21. A further ₹25,000 crore tranche is scheduled for September 28, taking the announced OMO sales to ₹1 lakh crore.
The elevated liquidity has been attributed partly to strong mobilisation of Foreign Currency Non-Resident (FCNR-B) deposits and subsequent currency swaps with the RBI, which increased rupee liquidity in the banking system. Month-end government expenditure, including salary and pension payments, has also contributed to the availability of funds.
The latest VRRR operation is therefore part of the RBI’s ongoing liquidity-management measures as it seeks to regulate surplus funds in the banking system and maintain orderly conditions in the overnight money market.
