Despite being nudged by the Reserve Bank of India, banks continue to give a muted response to parking funds in the variable rate reverse repo (VRRR) operations. The auction held on Friday saw banks park just ₹ 5,354 crore against the notified amount of ₹50,000 crore.
The previous rounds have also received tepid response. For example, in the auction held on August 25 the central bank received offers aggregating ₹22,419 crore against the notified amount of ₹ one lakh crore at the VRRR auction. In the VRRR auction on August 11, RBI had received offers aggregating ₹34,139 crore against the notified amount of ₹ one lakh crore.
According to experts, due to volatility in credit demand & fluctuations of exchange rate in forex market, the banks prefer to keep liquidity either with themselves or under SDF rather than parking funds with the RBI at VRRR auctions.
“It is imperative that banks assess their actual liquidity requirements over the reserve maintenance cycle and bid accordingly in the auctions under the main 14-day VRRR operations of RBI,” RBI Governor Shaktikanta Das had said earlier this month.
In August, the RBI asked scheduled banks to maintain an incremental cash reserve ratio (I-CRR) of 10 per cent. The move was being seen as a warning shot to the banks after attempts by the RBI to suck out liquidity through 14-day variable rate reverse repo auctions met with limited success.