In a move to regulate excess liquidity in the banking system, Reserve Bank of India (RBI) conducted a seven-day variable rate reverse repo (VRRR) auction on Friday, withdrawing ₹2,00,031 crore.
The central bank received bids worth ₹2,28,098 crore, which exceeded the notified amount of ₹2,00,000 crore. It accepted bids at a cut-off rate of 5.24% and a weighted average rate of 5.23%.
At present, liquidity in the banking system is estimated to be in surplus of around ₹4.09 lakh crore, prompting the RBI to take steps to absorb excess funds.
Earlier, on April 10, the RBI had conducted a similar seven-day VRRR auction, withdrawing ₹2,00,041 crore. These funds were reversed into the banking system today.
“Going ahead, we will continue to be proactive and pre-emptive in liquidity management and ensure sufficient liquidity in the banking system to meet the productive requirements of the economy,” said Sanjay Malhotra during the April monetary policy.
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