RBI Absorbs Rs 6.02 Lakh Crore via 2 VRRRs As Banking System Liquidity Surplus Hits Record High

Mumbai: The Reserve Bank of India (RBI) on Friday absorbed over Rs 6.02 lakh crore from the banking system through two variable rate reverse repo (VRRR) auctions as surplus liquidity remained at a record high.

The central bank received and accepted bids worth Rs 5,41,975 crore in a three-day VRRR auction against the notified amount of Rs 7 lakh crore. The auction was conducted at a cut-off rate of 5.24 per cent.

In another three-day VRRR auction, against a notified amount of Rs 1.5 lakh crore, banks parked Rs 60,419 crore with the RBI, also at 5.24 per cent.

Together, the two operations helped the RBI absorb Rs 6,02,394 crore of surplus liquidity.

The RBI has stepped up liquidity absorption operations as the banking system has been flooded with funds following large inflows through the special FCNR(B) deposit scheme.

Currently, liquidity in the banking system is estimated to be in surplus of around Rs 10.32 lakh crore as on September 3, according to the RBI’s data.

The RBI’s special forex measures mobilised USD 136.38 billion by August 31, including USD 127.23 billion through FCNR(B) deposits, USD 5.26 billion through OFCBs and USD 3.89 billion via ECBs, according to the RBI’s data.

The FCNR(B) window was closed a month early on August 31 due to the strong response, while the ECB/OFCB facility remains open till December 31 and inflows through these routes are expected to pick up.

The mobilisation brought foreign currency into the banking system, while the subsequent swaps with the RBI provided rupee liquidity to banks.

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

The higher surplus liquidity in the banking system has pulled down the short-term money market rates in the last few weeks. Currently, the weighted average call money rates are trading at 4.93 per cent, which is 0.32 per cent below the policy rate.

To align with the repo rate, the central bank conducted 32 VRRR auctions between August and so far in September, with maturities ranging from overnight to 14 days.

(Disclaimer: Except for the headline, this article has not been edited by HDFC Sky editorial team and is auto-generated from PTI feed.)