Mumbai, Sept 2026 : The Reserve Bank of India (RBI) on Tuesday absorbed Rs 3,93,352 crore from the banking system through a variable rate reverse repo (VRRR) auction as it continued efforts to manage surplus liquidity and keep overnight money market rates aligned with the policy repo rate.
The central bank had notified an auction amount of Rs 5 lakh crore and received bids worth Rs 3,93,352 crore. The RBI accepted the entire amount at a cut-off rate and weighted average rate of 5.24 per cent, according to a statement issued by the central bank.
The VRRR auction is part of the RBI’s ongoing liquidity management operations. The central bank has been conducting such auctions over the past month to absorb excess funds from the banking system and ensure that short-term money market rates remain consistent with its monetary policy stance.
Banking system liquidity was estimated at around Rs 10.73 lakh crore as of September 11, reflecting the substantial surplus funds available with banks.
The liquidity surplus has been attributed largely to strong mobilisation of foreign currency non-resident (FCNR-B) deposits by banks. The inflow of foreign currency into the banking system, followed by swaps with the RBI, has resulted in additional rupee liquidity being made available to banks.
Alongside VRRR operations, the RBI has also announced open market operation (OMO) sales of government securities to further absorb excess liquidity. Last week, the central bank announced OMO sales worth Rs 1 lakh crore, to be conducted in three separate tranches.
The first OMO auction, involving government securities worth Rs 50,000 crore, is scheduled for September 17. This will be followed by two auctions of Rs 25,000 crore each on September 21 and September 28.
Through these measures, the RBI is seeking to calibrate liquidity conditions in the financial system while preventing excessive surplus funds from pushing short-term interest rates significantly below the policy rate.
The latest VRRR auction follows another major liquidity absorption operation conducted earlier this month. The RBI had raised more than Rs 3.53 lakh crore through a one-day overnight VRRR auction to absorb excess liquidity.
At that auction, the notified amount was also Rs 5 lakh crore, while banks submitted bids totalling Rs 3,53,390 crore. The RBI accepted the entire amount, equivalent to more than 70 per cent of the notified amount.
The cut-off and weighted average rate in that auction were also fixed at 5.24 per cent.
The continued use of VRRR auctions and planned OMO sales reflects the RBI’s efforts to maintain orderly liquidity conditions as the banking system remains flush with funds. By absorbing surplus liquidity in a calibrated manner, the central bank aims to keep overnight rates appropriately aligned with its policy framework while ensuring adequate availability of funds for productive economic activity.
(Disclaimer :The content of this article is sourced from a news agency and has not been edited by the Mavericknews30 team.)
