RBI Steps Up Liquidity Management, Absorbs ₹2.23 Lakh Crore Through VRRR Auction
Mumbai: The Reserve Bank of India absorbed ₹2.23 lakh crore from the banking system through a variable rate reverse repo auction as it continued efforts to manage high surplus liquidity. Banks submitted bids worth ₹2,22,629 crore against the notified auction amount of ₹2.25 lakh crore. The central bank accepted the entire amount offered by participating institutions. The funds were accepted at a…
Mumbai: The Reserve Bank of India has taken significant steps to manage excess liquidity in the banking system by absorbing ₹2.23 lakh crore through a variable rate reverse repo auction. Commercial banks submitted bids totaling ₹2,22,629 crore, which the central bank accepted at a weighted average rate of 5.24%. The auction aimed to bring overnight money market rates closer to the policy repo rate and prevent policy transmission from being weakened by low short-term interest rates.
Liquidity in India's banking sector was already high, with an estimated surplus of nearly ₹6.94 lakh crore as of September 17. To address this, the RBI is employing open market operations, selling government securities worth ₹50,000 crore on Thursday, with two more tranches of ₹25,000 crore each scheduled for September 21 and September 28.
These measures, along with foreign currency deposits and government expenditures, contribute to the RBI's broader liquidity management strategy, with the central bank closely monitoring conditions and using tools to maintain alignment with policy objectives.
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