RBI mops up Rs 6.02 lakh crore through VRRR auctions against Rs 8.5 lakh crore intent
The surplus liquidity in the system rose to a record high of Rs 10.3 lakh crore as of September 3, forcing the central bank to step up liquidity absorption operations. The massive foreign currency inflows and the following dollar-rupee swaps are contributing to the massive liquidity overhang.
The Reserve Bank of India (RBI) struggled to extract excess liquidity from the inter-bank market during the three-day variable rate reverse repo (VRRR) auction. The central bank managed to mobilize a total of Rs 6.02 lakh crore through two separate VRRR auctions, falling short of the cumulative notified amount of Rs 8.5 lakh crore.
As of September 3, the surplus liquidity in the system reached a record high of Rs 10.3 lakh crore, prompting the RBI to intensify its liquidity absorption operations. The massive foreign currency inflows and subsequent dollar-rupee swaps are contributing to the significant liquidity overhang. Overnight call rates have been on a downward trend due to the abundant liquidity in the system, with the weighted average call rate settling at 4.95% on Thursday, down from 5.02% the previous day.
The central bank also sold two government securities on Friday, raising a total of Rs 32,000 crore. The new five-year stock's cut-off yield was recorded at 6.53%, while the 7.71% 2066 paper's cut-off yield was at 7.6618%, according to the RBI.
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