RBI Absorbs ₹3.93 Lakh Crore From Banking System via VRRR Auction Ahead of Repo Rate Decision

In a strategic move to manage excess liquidity within the financial system ahead of upcoming monetary policy decisions, the Reserve Bank of India (RBI) successfully raised ₹3,93,352 crore through a variable rate reverse repo (VRRR) auction on Tuesday. According to the central bank's official press release, bids totaling ₹393,352 crore were received against a notified amount of ₹5 lakh crore, with the bids accepted at a cut-off rate of 5.24 percent alongside a weighted average rate.The central bank has actively deployed VRRR auctions over the past month to effectively absorb surplus banking liquidity and align overnight money market rates closely with the prevailing repo rate, tackling an estimated systemic excess liquidity pool of around ₹10.73 lakh crore recorded up to September 11.Open Market Operations and FCNR (B) Inflows Driving Systemic Liquidity MeasuresBeyond the reverse repo auctions, the RBI announced open market operations (OMOs) involving the sale of government securities valued at ₹1 lakh crore structured across three separate tranches, with the first ₹50,000 crore auction scheduled for September 17, followed by tranches of ₹25,000 crore on September 21 and September 28.This surplus liquidity surge has been largely propelled by large-scale mobilization of FCNR (B) foreign currency deposits by commercial banks, subsequent currency swaps with the RBI that infused rupee liquidity, and customary month-end government expenditures covering salary and pension disbursements. These multi-pronged monetary interventions underscore the central bank's proactive stance in balancing money market dynamics and stabilizing financial conditions.