Mumbai, July 4
The Reserve Bank of India (RBI) on Thursday withdrew Rs 1,00,010 crore from the banking system through a seven-day variable rate reverse repo (VRRR) auction.
The move is aimed at reducing the excess liquidity currently present in the banking system. According to a statement by the RBI, it received bids worth Rs 1,70,880 crore during the auction.
“Out of this, the central bank accepted Rs 1,00,010 crore at a cut-off rate of 5.47 percent,” the Central Bank said in its statement.
This step is expected to reduce the surplus liquidity and could lead to a rise in short-term overnight rates.
As per the RBI’s latest data, the banking system had a liquidity surplus of around Rs 4.04 lakh crore as of July 3.
Despite previous liquidity absorption efforts, the system remained in surplus, largely due to month-end government inflows such as salary and pension disbursements.
In addition, redemption of government bonds and coupon payments added further liquidity.
Just last week, the Reserve Bank had removed Rs 84,975 crore from the system through a similar VRRR auction.
However, the surplus remained high, prompting another round of liquidity tightening.