RBI soaks up ₹2.1 trillion in liquidity amid banking system surplus

The RBI accepted bids totalling ₹2,10,192 crore across two overnight VRRR auctions on Monday as it moved to drain surplus liquidity from India's banking system. In the first auction, the central bank accepted ₹2,00,050 crore of the ₹2,10,688 crore in bids received against a notified amount of ₹2 lakh crore, at a weighted average rate of 5.24 per cent. The second auction saw more muted participation, with banks bidding just ₹10,142 crore against the notified amount of ₹50,000 crore, all of which the RBI accepted.

The liquidity absorption operations underscore the central bank's ongoing efforts to manage excess cash in the financial system. The RBI has conducted multiple VRRR auctions over the past two months with the dual objective of absorbing surplus liquidity and ensuring overnight money market rates align more closely with the repo rate.

As of October 4, the banking system was operating with an estimated surplus liquidity of approximately ₹5.16 lakh crore, according to RBI data. The substantial surplus reflects the accumulation of excess funds in the system, which the central bank has been systematically addressing through reverse repo operations and other liquidity management tools.