The central bank has so far absorbed Rs 4.91 lakh crore from the banking system through VRRR auction. Apart from falling funds in the SDF, the overall surplus liquidity in the banking system has narrowed to around Rs 3 lakh crore, from over Rs 4 lakh crore in the start of July.
Banks will get the flexibility to choose tenor from December 29 for SDF or MSF operations, and reversal will start taking place from December 30
Main focus of the monetary policy is on liquidity and further action depends on whether RBI thinks liquidity is permanent or transitory, Sonal Varma, MD & Chief India Economist at Nomura Financial Advisory & Securities (India) said.