Banks park ₹1.7 trn at 7-day VRRR auction as banks roll over matured amount

The Reserve Bank of India's 7-day VRRR auction saw robust participation, with banks parking Rs 1.7 trillion, rolling over maturing funds. The auction's cut-off rate was 5.49%.

The Reserve Bank of India’s (RBI) seven-day variable rate reverse repo (VRRR) auction saw robust participation, with banks parking ₹1.71 trillion with the central bank under this window, against the notified amount of ₹2 trillion.

 

RBI accepted the amount at a cut-off rate of 5.49 per cent.

 

RBI’s VRRR operations are aimed at absorbing surplus liquidity from the system and anchoring short-term rates closer to the policy repo rate. Latest data shows net liquidity in the banking system was in a surplus of ₹2.86 trillion as of Thursday.

 

“Banks rolled over the amount that matured on Friday,” said a dealer at a state-owned bank, adding that the bidding was better than the previous auction because overnight rates have come down. 

 

The overnight Weighted Average Call Rate (WACR) settled at 5.46 per cent, compared to the previous day’s close of 5.49 per cent, while the overnight Tri-party repo rate settled at 5.33 per cent, compared to 5.43 per cent on Thursday. WACR is the operating target of the monetary policy, which the RBI wants to be closer to the repo rate.

 

Previously, RBI’s overnight VRRR auction on Thursday saw muted participation, with banks parking only ₹13,075 crore against the notified amount of Rs 50,000 crore, owing to a rise in overnight rates, which made it less attractive for banks to park funds through the VRRR window.

 

Earlier on Tuesday, RBI received bids of ₹46,058 crore against a notified amount of ₹50,000 crore at the three-day Variable Rate Reverse Repo (VRRR) auction.