The Reserve Bank of India (RBI) conducted a ₹2 trillion variable rate reverse repo (VRRR) auction, witnessing strong participation from banks amid surplus liquidity conditions in the system.
According to RBI data, the auction received bids worth ₹2.28 trillion, exceeding the notified amount of ₹2 trillion, indicating robust demand from banks to park excess funds with the central bank.
The RBI had announced the auction to manage transient liquidity surplus, as excess funds in the banking system remained elevated.
Liquidity surplus, measured by funds parked by banks under the liquidity adjustment facility (LAF), stood at ₹4.09 trillion on Thursday, down from ₹5.2 trillion on Wednesday, but still reflecting comfortable liquidity conditions.
The weighted average call rate (WACR) a key indicator of short-term interest rates stood at 5.11%, slightly higher than 5.09% in the previous session, suggesting stable overnight borrowing costs.
VRRR auctions are used by the RBI to absorb excess liquidity from the banking system, helping maintain stability in short term interest rates and ensuring better transmission of monetary policy.
The strong response to the auction highlights continued liquidity surplus in the system, driven by factors such as government spending, capital flows, and banking system dynamics.
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