RBI Turns to 30-Day VRRR to Absorb Excess Liquidity
The longer-term auction lets banks reverse positions early as surplus liquidity hit a record Rs 10.3 lakh crore, analysts said.
- On Friday, the Reserve Bank of India mopped up Rs 6.02 lakh crore through variable rate reverse repo auctions, falling short of the Rs 8.5 lakh crore target.
- Surplus liquidity in India's banking system surged to a record Rs 10.3 lakh crore by September 3, driven by massive dollar inflows exceeding $130 billion through special forex swap facilities.
- Excess liquidity pushed the weighted call money rate to 4.95%, significantly below the 5.25% policy repo rate, prompting analysts to warn the surplus could fuel rising inflation.
- Upasna Bhardwaj, chief economist at Kotak Mahindra Bank, said "OMO sales could mitigate the risks associated with narrowing interest rate differentials," while other analysts suggest Cash Reserve Ratio hikes.
- The RBI will conduct a 30-day VRRR auction on Monday, targeting a withdrawal of Rs 7 lakh crore from the inter-bank market to manage the durable liquidity surplus.
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RBI turns to 30-day VRRR to absorb excess liquidity
The Reserve Bank of India is conducting auctions to absorb excess funds. This liquidity stems from special dollar mobilization programs and forex inflows. The central bank aims to manage surplus funds and control inflation pressures. Analysts expect liquidity to potentially reach fifteen lakh crore rupees soon. RBI also sold government papers to manage market liquidity effectively.
RBI mops up Rs 6.02 lakh crore through VRRR auctions against Rs 8.5 lakh crore intent
The surplus liquidity in the system rose to a record high of Rs 10.3 lakh crore as of September 3, forcing the central bank to step up liquidity absorption operations. The massive foreign currency inflows and the following dollar-rupee swaps are contributing to the massive liquidity overhang.
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RBI to lock Rs 7 lakh crore excess liquidity for 30 days as banking system faces record cash glut
Mumbai, Sep 5 (SocialNews.XYZ) The Reserve Bank of India (RBI) is stepping up efforts to absorb surplus liquidity from the banking system as excess cash reaches record levels following a surge in foreign-currency inflows from... - Social News XYZ
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