RBI Gets ₹31,025 Crore Bids at VRR Auction Against ₹50,000 Crore Notified

The Reserve Bank of India (RBI) absorbed part of the banking system’s excess liquidity on Thursday through its overnight variable rate repo (VRR) auction. The central bank drew bids worth ₹31,025 crore against the ₹50,000 crore it had offered, signalling that surplus liquidity remains substantial despite upcoming tax-related outflows.

Liquidity Surplus Remains Elevated

As per RBI data, net liquidity in the banking system stood at ₹2.65 trillion in surplus on Wednesday. Market participants noted that the auction was timed to pre-empt any tightening as goods and services tax (GST) payments are estimated at ₹1–1.25 trillion.

Continued Use Of VRRR Auctions And Policy Framework

As per news reports, Banks placed bids worth ₹1.82 trillion in the Reserve Bank of India's (RBI) August 14th eight-day Variable Rate Reverse Repo (VRRR) auction, falling just short of the ₹2 trillion target. The central bank accepted the bids at a cut-off rate of 5.49%.

The majority of these bids were rollovers from previous VRRR auctions on August 8th and 11th, as banks sought to renew their maturing funds.

The current monetary framework keeps the policy repo rate at 5.5%, with the standing deposit facility (SDF) at 5.25% acting as the floor and the marginal standing facility (MSF) at 5.75% forming the ceiling. The RBI’s VRRR operations are designed to draw down excess liquidity while ensuring that short-term rates remain aligned with this corridor.

Read More: India Inc's Foreign Equity Investments Fall 22% in July: RBI!

Conclusion

With liquidity still running significantly above comfort levels, the RBI’s active use of VRRR auctions highlights its balancing act between surplus management and interest rate stability. Market watchers expect such fine-tuning operations to continue in the near term as the banking system adjusts to periodic outflows.

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