Daijiworld Media Network – Mumbai
Mumbai, Sep 23: The Reserve Bank of India (RBI) on Wednesday absorbed Rs 75,026 crore from the banking system through an overnight variable rate reverse repo (VRRR) auction amid surplus liquidity.
The central bank received bids worth Rs 87,993 crore against a notified amount of Rs 75,000 crore, but accepted Rs 75,026 crore, according to the RBI notification. The bids were accepted at a cut-off and weighted average rate of 5.24 per cent.
The RBI has been conducting VRRR auctions since last month to absorb excess liquidity from the banking system and align overnight money market rates with the repo rate.
Liquidity in the banking system was estimated to be in surplus of around Rs 4.45 trillion as of September 22, according to RBI data.
The central bank also conducted open market operation (OMO) sales of government securities worth Rs 50,000 crore on September 17 and Rs 25,000 crore on September 21. Under an OMO sale, banks and other investors purchase government securities from the RBI, thereby draining rupee liquidity from the banking system.
The RBI had announced OMO sales totalling Rs 1 trillion in three tranches to manage prevailing liquidity conditions. The final tranche of Rs 25,000 crore is scheduled for September 28.
The banking system has been flush with liquidity due to substantial mobilisation of FCNR(B) deposits by banks. The inflow of foreign currency and subsequent swaps with the RBI provided rupee liquidity to banks.
Month-end government expenditure, including salary and pension payments, also contributed to the surplus liquidity.