RBI absorbs ₹2.10 trillion via VRRR auctions amid surplus liquidity | Finance News
The Reserve Bank of India (RBI) on Monday absorbed ₹2,10,192 crore liquidity from the banking system through two overnight Variable Rate Reverse Repo (VRRR) auctions, amid huge surplus liquidity in the system.
During the first auction, the central bank received bids worth ₹2,10,688 crore for a notified amount of ₹2 trillion. It accepted ₹2,00,050 crore at a weighted average rate of 5.24 per cent.
However, the response from banks in the second auction was tepid, with just ₹10,142 crore in bids for a notified amount of ₹50,000 crore, which the central bank accepted fully.
Over the last two months, the central bank has undertaken multiple VRRR auctions 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 ₹5.16 trillion as on October 4, as per RBI data.
The banking system has been flush with liquidity due to heavy mobilisation of FCNR (B) deposits by banks, as the money 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.
