RBI absorbs ₹6.02 lakh crore via two VRRR auctions amid record banking liquidity surplus

The central bank accepted bids of ₹5,41,975 crore in a three-day VRRR auction, against a notified amount of ₹7 lakh crore, with a cut-off rate of 5.24%

Mumbai: The Reserve Bank of India (RBI) absorbed more than Rs 6.02 lakh crore from banks on Friday through two Variable Rate Reverse Repo (VRRR) auctions as liquidity in the banking system remained at record-high levels.The move comes as the central bank steps up efforts to manage the huge liquidity surplus created partly by strong foreign currency inflows.RBI’s VRRR Auctions Absorb Surplus FundsIn the first three-day RBI VRRR auction, banks parked Rs 5,41,975 crore against the notified amount of Rs 7 lakh crore. The cut-off rate was 5.24%.A second three-day auction attracted Rs 60,419 crore against the notified Rs 1.5 lakh crore, also at 5.24%.RBI Faces Potential $10.6 Billion Cost After Record Diaspora Deposit Inflows Under Forex Swap Facility Together, the two operations absorbed Rs 6,02,394 crore from the banking system.According to RBI data, the banking system liquidity surplus stood at around Rs 10.32 lakh crore as of September 3.FCNR(B) Inflows Boost LiquidityThe surge in liquidity follows the RBI’s special forex measures, which mobilised $136.38 billion by August 31.Of this, $127.23 billion came through FCNR(B) deposits, while OFCBs contributed $5.26 billion and ECBs added $3.89 billion.Government spending on salaries and pensions towards the month-end also added liquidity to the financial system.RBI’s Policy Push Could Help India Maintain Balance-of-Payments Buffer Of Up To $75 Billion In FY27 The abundance of funds has pushed short-term money-market rates lower. The weighted average call money rate is currently around 4.93%, or 32 basis points below the policy rate.To bring short-term rates closer to the repo rate, the RBI has intensified liquidity absorption. It conducted 32 VRRR auctions between August and early September, with maturities ranging from overnight to 14 days.