RBI mops up over ₹6 lakh crore through VRRR auctions; 30-day auction sees tepid response

The Reserve Bank of India on Monday absorbed over ₹6 lakh crore from the banking system through two variable rate reverse repo (VRRR) auctions as it stepped up liquidity management amid a large surplus of funds.

The 30-day VRRR auction received a tepid response from banks as bids fell significantly short of the notified amount.

The RBI accepted ₹2,59,276 crore from banks through a 30-day VRRR auction against a notified amount of ₹7 lakh crore. The cut-off and weighted average rate stood at 5.24%.

The central bank absorbed another ₹3,53,390 crore through an overnight VRRR auction, against a notified amount of ₹5 lakh crore.

The cut-off and weighted average rate in the one-day auction were also 5.24%.

The overnight auction was conducted between 11 am and 11.30 am on Monday.

The banking system currently has a liquidity surplus of around ₹10.73 lakh crore.

The RBI has stepped up liquidity absorption operations after the banking system was flooded with funds following large foreign currency inflows mobilised through the special FCNR(B) deposit scheme and other forex measures.

According to RBI data, the special forex measures had mobilised $136.38 billion as of August 31. Of this, $127.23 billion came through FCNR(B) deposits, $5.26 billion through overseas foreign currency borrowings (OFCBs) and $3.89 billion via external commercial borrowings (ECBs).

The RBI had introduced a special USD-INR forex swap facility on June 8 to attract foreign currency inflows through FCNR(B) deposits, ECBs and OFCBs.

The FCNR(B) window was originally scheduled to remain open until September 30 but was closed a month early on August 31 following a strong response.

The ECB and OFCB components of the swap facility will remain open until December 31, 2026.

The inflows brought foreign currency into the banking system, while subsequent swaps with the RBI released rupee liquidity to banks, adding to the surplus in the financial system.

The central bank has conducted 32 VRRR auctions since August and so far in September, with maturities ranging from overnight to 14 days.