The Reserve Bank of India (RBI) said on Monday that it absorbed more than Rs 3.53 lakh crore of excess liquidity from the banking system through an overnight Variable Rate Reverse Repo (VRRR) auction with a one-day tenor, according to a central bank statement.
In a VRRR operation, the RBI drains liquidity from the system by accepting funds from banks for a one-day period. The latest operation used an overnight VRRR instrument with a 1-day tenor to mop up the surplus liquidity.
The RBI did not provide further details on bid sizes or the specific interest rate for this auction in the statement. The move is part of the central bank’s ongoing liquidity management framework intended to calibrate liquidity conditions in the banking system.
For lenders, borrowers, and investors, such liquidity management actions can influence short-term money-market conditions and funding costs. By draining excess liquidity, the RBI aims to affect the transmission of policy rates and stabilize near-term market dynamics.
