RBI to drain Rs 5 lakh crore of excess liquidity over 26 days via VRRR auction
The Reserve Bank of India announced a long-term reverse repo auction targeting the removal of five hundred billion rupees from the market due to significant surplus funds.
The Reserve Bank of India will conduct a 26-day variable rate reverse repo auction on Friday. The central bank aims to absorb approximately Rs 5 lakh crore (500 billion) in excess liquidity currently flooding the inter-bank market. As of Thursday, RBI data indicated a total surplus of Rs 10.5 lakh crore. Officials stated that auction participants may withdraw funds they lend during the process. This move is designed to drain durable liquidity caused by large overseas inflows under a special dollar-mobilisation scheme. Earlier, in a long-term 30-day auction held on Monday, the bank removed only Rs 2.59 lakh crore against a target of Rs 7 lakh crore. Consequently, the RBI was forced to run an overnight auction of Rs 5 lakh crore to manage the remaining flow.
