The Reserve Bank of India (RBI) plans to conduct four variable reverse repo rate (VRRR) auctions in the fortnight beginning August 13 till September 24, to absorb surplus liquidity from the banking system.
RBI Governor Shaktikanta Das underscored that the VRRR auctions should not be misread as a reversal of the central bank’s accommodative monetary policy stance.
The quantum of VRRR will increase by ₹50,000 crore with each auction. The first VRRR will be for ₹2.50 lakh crore, the second (on August 27) will be for ₹3 lakh crore, the third (on September 9) will be for ₹3.5 lakh crore, and the fourth will be for Rs 24 lakh crore.
There has been a high appetite for VRRR, going by the bid-cover ratio. Das assured that the system-level liquidity will still be more than ₹4 lakh crore after the conduct of four VRRR auctions.
The RBI will continue with its overnight fixed-rate reverse repo auction.
The surplus liquidity in the banking system was at ₹8.5 lakh crore as of August 4.
The Governor said RBI will conduct two more Government Security Acquisition Programme (G-SAP) operations of ₹25,000 crore each on August 12 and 26.
The purchase of G-Secs will be across the yield curve.