Banks roll over ₹1.82 trn at RBI's 8-day VRRR auction to absorb liquidity

RBI accepts Rs 1.82 trillion at 8-day VRRR auction as banks roll over maturing funds from earlier operations amid surplus system liquidity

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The Reserve Bank of India (RBI) received bids worth Rs 1.82 trillion against the notified amount of Rs 2 trillion at its eight-day variable rate reverse repo (VRRR) auction on Thursday, as banks rolled over maturing amounts from earlier VRRR operations conducted on 8 and 11 August. The central bank accepted the amount at a cut-off rate of 5.49 per cent.

 

On 8 August, in the auction of six-day tenure, the RBI had received bids worth Rs 1.46 trillion, which matured on Thursday. In the second auction, of three-day tenure on Monday, the central bank had received bids worth Rs 44,790 crore.

 

According to market participants, the central bank’s objective was to absorb the maturing amount of around Rs 2 trillion, as system liquidity continues to remain in surplus at around Rs 3 trillion. On Wednesday, net liquidity in the banking system stood at a surplus of Rs 2.90 trillion, as per the latest RBI data.

 

“Banks rolled over the maturing amount from the previous six-day and three-day VRRR auctions,” said a dealer at a state-owned bank. 

 

The RBI’s VRRR operations are intended to absorb surplus liquidity from the financial system and anchor short-term money market rates closer to the policy repo rate.

 

The weighted average call rate (WACR), the operating target of monetary policy, settled at 5.47 per cent on Friday, against the previous close of 5.46 per cent.

 

The RBI had conducted two variable rate repo auctions in July when overnight rates were trading near the marginal standing facility (MSF) rate.

 

The MSF rate, set 25 basis points (bps) above the policy repo rate, is the ceiling of the liquidity adjustment facility corridor. The standing deposit facility (SDF) rate, which is 25 bps below the repo rate, is the floor. The policy repo rate is currently at 5.50 per cent.