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This comes in the backdrop of the banking system’s surplus liquidity touching ₹2.43 lakh crore as on June 23. | Photo Credit: REUTERS
The Reserve Bank of India (RBI) has decided to conduct a 7-day Variable Rate Reverse Repo (VRRR) auction on June 27 to absorb surplus liquidity from the banking system.
This comes in the backdrop of the banking system’s surplus liquidity touching ₹2.43 lakh crore as on June 23.
“After a pause, the Reserve Bank of India has announced a 7-day Variable Rate Reverse Repo VRRR auction of ₹1 lakh crore...While the size and tenor of the VRRR are significant, market participants are likely to view this as a RBI’s policy signalling a clear message that surplus liquidity conditions will be actively managed going forward,” said Venkatakrishnan Srinivasan, Founder & Managing Partner, Rockfort Fincap LLP.
He observed that the move underscores the Central bank’s intent to anchor short-term rates and reduce excess liquidity-driven distortions.
V Rama Chandra Reddy, Head – Treasury, Karur Vysya Bank, said the banking system surplus liquidity could swell to about ₹4.5 lakh crore toward this month-end due to government spending.
Hence, the Central bank announced the VRRR auction to absorb liquidity, in a bid to keep the banking system surplus at about 1 per cent of deposits.
In his last monetary policy statement, RBI GovernorSanjay Malhotra reiterated that RBI will continue to monitor the evolving liquidity and financial market conditions and proactively take further measures, as warranted.
Meanwhile, on a review of evolving liquidity conditions, RBI said it will not conduct the 14-day main (VRRR) operation on Friday, June 27, 2025, for the ensuing fortnight. It had not conducted this operation on June 13, either.
Published on June 24, 2025
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