RBI drains record ₹6 trillion surplus liquidity via reverse repo auctions

The Reserve Bank of India conducted two variable rate reverse repo (VRRR) auctions on Friday, collectively absorbing ₹6,02,394 crore of surplus liquidity from banks amid an unprecedented cash glut in the financial system.

In the first auction, the RBI accepted bids worth ₹5,41,975 crore against a notified amount of ₹7 lakh crore, with both tranches settled at a cut-off rate of 5.24 per cent. A second three-day VRRR operation saw banks park ₹60,419 crore with the central bank against the offered amount of ₹1.5 lakh crore, also at the same rate.

The operations reflect intensifying liquidity management challenges as the banking system grapples with record cash inflows. Data from the RBI indicates that surplus liquidity in the system stood at approximately ₹10.32 lakh crore as of September 3, prompting the central bank to ramp up absorption measures.

Large foreign currency deposits flowing through the special FCNR(B) deposit scheme have been a key driver of the liquidity surge. By stepping up reverse repo operations, the RBI aims to prevent excess funds from distorting money markets while maintaining system stability. Analysts expect the central bank to continue calibrating its liquidity operations in the coming weeks as fund flows normalise.