The Reserve Bank of India (RBI) announced on April 4 that it will hold a 14-day variable rate reverse repo (VRRR) auction worth Rs 1.25 lakh crore on April 5.
“In light of the current liquidity conditions, it has been decided to conduct a Variable Rate Reverse Repo (VRRR) auction on April 05,” stated the RBI in a release.
The auction is scheduled between 1:30 PM and 2:00 PM, with the reversal of funds set for April 19.
Typically, the central bank employs VRRR auctions to absorb excess liquidity from the banking system.
As of April 3, the banking system is estimated to have a surplus liquidity of around Rs 1.58 lakh crore, according to RBI’s money market operation data.
Earlier today, Moneycontrol reported that the RBI may conduct additional VRRR auctions in the near future to address the significant liquidity surplus in the banking system and align overnight rates with the repo rate.
The banking system’s liquidity surplus is attributed to government spending, leading to a notable decrease in overnight call money rates, which have fallen below the repo rate.
