The central bank received bids worth ₹1.37 lakh crore compared to the notified amount of ₹75,000 crore
Mumbai: The Reserve Bank of India on Monday conducted another round of variable repo rate auction of ₹75,000 crore to augment the liquidity shortfall in the system.
The central bank received bids worth ₹1.37 lakh crore compared to the notified amount of ₹75,000 crore.
While the cut-off rate was fixed at 4.12%, the weighted average rate came in at 4.13%.
Dealers expect this shortfall to reverse on Tuesday as nearly ₹2.49 trillion worth of liquidity is expected to come into the system after the 28-day and 7-day variable reverse repo rate (VRRRs) mature. Another ₹4.35 trillion will come into the system after the 14-day VRRR matures on Friday.
The banking system has been in a liquidity surplus mode since June 2019. The liquidity surplus widened significantly and averaged ₹7.7 trillion last year.
RBI has been continuously doing VRRR auctions to remove this excess liquidity from the banking system. A reverse repo is a rate at which RBI borrows money from banks. RBI borrows a part of this money at a fixed rate and some of it at variable rate.
In its 8 December policy, RBI Governor Shaktikanta Das said it is looking at a scenario where there will be no overnight fixed rate reverse repo and 14-day VRRR will be the main instrument for liquidity management.
Source Link :