RBI Absorbs ₹2.40 Lakh Cr Via VRRR Auction Amid Huge Surplus Liquidity

The Reserve Bank of India (RBI) on Thursday absorbed ₹2.40 lakh crore through variable rate reverse repo (VRRR) auctions from the banking sector amid huge surplus liquidity.

The central bank received bids worth ₹2,39,959 crore, which it accepted fully, at a cut-off and weighted average rate of 5.24%.

The RBI has been, since last month, doing various VRRR auctions in order to absorb excess surplus liquidity from the banking system and align the overnight money market rates to the repo rate.

Currently, liquidity in the banking system is estimated to be in surplus of around ₹7.38 lakh crore as on September 16.

Apart from VRRR, last week, the central bank announced Open Market Operation (OMO) sales of government securities for a notified amount of ₹1 lakh crore in three tranches.

The first tranche of ₹50,000 crore will be held on September 17, and ₹25,000 crore each on September 21 and September 28, RBI said.

The banking system has a huge surplus of liquidity due to heavy mobilisation of FCNR (B) deposits by banks, which brought foreign currency into the system, while subsequent swaps with the RBI provided rupee liquidity to banks.

Besides FCNR(B) inflows, month-end government expenditure, including payments toward salaries and pensions, also added to liquidity in the banking system.