Banks’ Demand Muted at RBI’s VRR Auction Despite Lower Surplus Liquidity

Mumbai: The demand from banks remained muted at the Reserve Bank of India’s (RBI) three-day variable rate repo (VRR) auction held on Friday, indicating limited demand for short-term funds from banks.

The central bank received bids worth Rs 16,750 crore from banks at the VRR auction against the notified amount of Rs 1 lakh crore.

The RBI accepted the entire amount at the auction at a cut-off and weighted average rate of 5.26 per cent.

Liquidity conditions in the banking system remained in surplus, though at a lower level.

According to the latest data available with the RBI, systemic liquidity surplus stood at around Rs 19,163.11 crore as on June 18.

The liquidity position improved marginally compared with the previous day but remained lower, reflecting tighter conditions in the banking system.

The muted participation in the VRR auction indicates limited demand for short-term funds from banks despite the RBI providing liquidity support through variable rate repo operations.

The VRR auctions are conducted by the RBI to manage short-term liquidity conditions and align overnight rates with the policy rate corridor.

To ease liquidity pressures and keep overnight money market rates in check, the central bank has infused about Rs 1.89 lakh crore in transient liquidity through variable rate repo (VRR) auctions across different tenures over the past few days.

Of the total infusion, the RBI injected Rs 72,300 crore on Wednesday through two VRR auctions, Rs 89,440 crore via a seven-day VRR auction on June 16, and Rs 28,220 crore through an overnight VRR auction on June 15, according to RBI data.

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