Pandemic concerns may have prompted RBI to go slow on liquidity operations

It was widely expected RBI would announce a three-day reverse repo auction of Rs 2 trn, rolling over last such auction conducted on Monday; that did not happen during market hours

The Reserve Bank of India (RBI) on Thursday positively surprised the bond markets by going slow on its liquidity absorption mode, possibly indicating its readiness to not rush towards normalisation amid a pandemic scare.

Generally, the central bank has been rolling over its variable rate reverse repo (VRRR) auctions in order to remove excess liquidity from the banking system. It was widely expected that the RBI would be announcing a three-day reverse repo auction of Rs 2 trillion, rolling over the last such auction conducted on Monday.

The central bank did not do so during the market hours. But after