The Reserve Bank of India (RBI) will conduct two-day variable rate reverse repo (VRRR) auction for a notified amount of Rs 1 lakh crore today (July 3).
The auction will be held between 12:30 pm and 1 pm, and reversal of these funds will take place on July 5, the central bank said in a release.
Usually, the central bank conducts reverse repo auction to remove excess liquidity from the banking system.
Currently, the liquidity in the banking system is estimated to be in surplus of around Rs 1.26 lakh crore as on June 30, according to the RBI’s money market operation.
The surplus liquidity in the banking system widened due to government spending on account of salaries and pensions, dealers said.
Last week too, the RBI conducted 14-day VRRR auction for a notified amount of Rs 1 lakh crore, but received muted response from the banks as they have only parked Rs 11,789 crore at 6.49 percent cut-off price.
RBI Governor Shaktikanta Das in the monetary policy statement said that going forward, the Reserve Bank will remain nimble in its liquidity management while ensuring that adequate resources are available for the productive requirements of the economy.
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