 "RBI to conduct two VRRR auctions to absorb ₹3 trillion from system")
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The Reserve Bank of India (RBI) plans to conduct two Variable Rate Reverse Repo (VRRR) auctions on Friday—of six-day and three-day tenures—to withdraw a total of Rs 3 trillion from the banking system.
Market participants said the central bank aims to absorb the maturing amount of over Rs 2.8 trillion, while system liquidity remains in surplus at around Rs 4 trillion.
On Wednesday, net liquidity in the banking system stood at a surplus of Rs 3.90 trillion, according to the latest data from the RBI.
“They are trying to absorb the maturing amount,” said Gaura Sen Gupta, chief economist, IDFC FIRST Bank. “We have around Rs 4 trillion of surplus liquidity and around Rs 1.6 trillion in the Standing Deposit Facility (SDF), and the tax payments are scheduled around 20 August, hence they want to absorb the excess funds over six and three days,” she added.
The RBI’s VRRR operations are aimed at absorbing surplus liquidity from the system and anchoring short-term rates closer to the policy repo rate.
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