The Reserve Bank of India (RBI) on April 4 said it will conduct a 14-day variable rate reverse repo (VRRR) auction worth Rs 1.25 lakh crore on April 5.
“On a review of the current and evolving liquidity conditions, it has been decided to conduct a Variable Rate Reverse Repo (VRRR) auction on April 05,” RBI said in a release.
The auction will be held between 1:30 PM and 2:00 PM and reversal of these funds will take place on April 19.
Usually, the central bank conducts VRRR auction to absorb surplus liquidity from the banking system.
Currently, liquidity in the banking system is estimated to be in surplus of around Rs 1.58 lakh crore as on April 3, per RBI’s money market operation data.
Earlier today, Moneycontrol reported that the central bank may conduct more VRRR auctions in the coming days to absorb the huge surplus of liquidity in the banking system and align overnight rates to the repo rate.
The banking system was flush with liquidity due to government spending, which resulted in overnight call money rates falling sharply below the repo rate.
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