RBI mops up Rs 6.02 lakh crore through VRRR auctions against a Rs 8.50 lakh crore plan

Kolkata: Market response to the three-day variable rate reverse repo (VRRR) auction, which the central bank conducted to suck out excess liquidity spawned by the forex-inflow programs, fell short of the earmarked quota.

The Reserve Bank of India (RBI) Friday mobilised a total of Rs 6.02 lakh crore through two separate VRRR auctions against the cumulative notified amount of Rs 8.5 lakh crore.

Surplus liquidity in India’s banking system surged to a record high of Rs 10.3 lakh crore as of September 3, forcing the central bank to step up liquidity absorption operations. Record inflows exceeding $130 billion through the forex-inflow programs and the following dollar-rupee swaps are contributing to the massive liquidity overhang.


To be sure, economists expect the liquidity surplus to be transitory, with a robust economy expected to draw in the excess funds currently sloshing about in the banking system. Furthermore, banks are also tweaking loan programs to ensure the surplus funds are put to productive use quickly.

Also read | India's forex reserves rise by $11.47 billion to hit record high of $740.80 billion

Meanwhile, overnight call rates are on a downward trend on account of the abundant liquidity in the system. The weighted average call rate stood at 4.95% Thursday, against 5.02% a day prior. The policy repo rate is at 5.25%.

The central bank sold two government papers -- one new stock and the 7.71% 2066 stock for a total Rs 32,000 crore Friday. The new five-year stock saw the cut-off yield settling at 6.53% while the 7.71% 2066 paper saw the cut-off yield at 7.6618%, the RBI said.