RBI absorbs Rs 3.93 lakh crore via VRRR auction

RBI receives Rs 3.93 lakh crore bids in VRRR auction

Mumbai, Sep 15

The central bank received bids worth Rs 3,93,352 crore against a notified amount of Rs 5 lakh crore and accepted all the bids at a cut-off and weighted average rate of 5.24 per cent, according to an RBI release.

The RBI has been conducting VRRR auctions over the past month to absorb surplus liquidity from the banking system and align overnight money market rates with the repo rate.

The liquidity surplus in the banking system was estimated at around Rs 10.73 lakh crore as of September 11.

The banking system has been flush with liquidity following heavy mobilisation of foreign currency non-resident (FCNR-B) deposits by banks, which brought foreign currency into the system. Subsequent swaps with the RBI provided rupee liquidity to banks.

In addition, the RBI last week announced open market operation (OMO) sales of government securities worth Rs 1 lakh crore in three tranches to absorb liquidity.

The first OMO auction for Rs 50,000 crore is scheduled for September 17, followed by two auctions of Rs 25,000 crore each on September 21 and September 28.

The central bank's liquidity management operations come as it seeks to keep short-term money market rates aligned with its policy rate while managing excess funds in the banking system.

Earlier in September, the central bank raised over Rs 3.53 lakh crore through an overnight Variable Rate Reverse Repo (VRRR) auction with a 1-day tenor to absorb excess liquidity from the banking system.

While the notified amount for the reverse repo auction was Rs 5 lakh crore, the bids received amounted to Rs 3,53,390 crore.

The RBI absorbed the entire sum which works out to over 70 per cent of the notified amount. It accepted the full amount at a cut-off rate and weighted average rate of 5.24 per cent, the statement said.

— IANS