The Reserve Bank of India (RBI) has announced a seven-day variable rate reverse repo (VRRR) auction worth Rs 2 lakh crore on April 17. This move is aimed at addressing the surplus liquidity in the banking system. The auction, scheduled between 9:30 am and 10:00 am on Friday, will see funds reversed on April 24.
The decision to conduct this auction is in response to the current surplus liquidity conditions. The RBI aims to absorb excess liquidity, particularly before the usual outflows around the 20th of each month due to GST payments. These outflows typically impact systemic liquidity and short-term money market rates.
With liquidity estimated at around Rs 5.22 lakh crore in the banking system as of April 15, there is a significant cash surplus in banks. The RBI had previously conducted a similar auction on April 10, absorbing over Rs 2 lakh crore. These funds are set to mature on April 17, aligning with the upcoming liquidity management operation.
RBI Governor Sanjay Malhotra has highlighted the central bank’s proactive stance on liquidity management. Following the April monetary policy, he emphasized the RBI’s commitment to ensuring adequate liquidity to support the economy’s needs while maintaining financial market stability.
Last month, the RBI extended the enhanced export credit period to support exporters facing challenges due to the West Asia crisis. This extension, up to 450 days till June 30, 2026, aims to assist exporters dealing with geopolitical uncertainties and logistical disruptions.
