RBI’s 7 lakh Crore VRRR Auction Witnesses Low Bank Participation Despite Excess Funds

Despite an overabundance of cash in the banking system, banks gave the Reserve Bank of India’s 30-day variable rate reverse repo (VRRR) auction a lacklustre response, with offers being far less than the informed amount.

A central bank employs a VRRR auction as a monetary policy instrument to take up surplus liquidity from the banking sector. Compared to a notified sum of Rs 7 lakh crore, the Reserve Bank of India (RBI) got bids for 30-day VRRR of Rs 2,59,276 crore. Despite the surplus liquidity, the Reserve Bank of India on Monday raised more than Rs 6 lakh crore in excess funds from the banking system in two auctions, which received a low response from banks.

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Following the announcement last week that the 30-day variable rate reverse repo (VRRR) auction had received a lukewarm reception from banks, the central bank announced another auction in the first half of the day.

According to an official release, the first auction received a lacklustre response, with bids of just over Rs 2.59 lakh crore for the 30-day VRRR, as opposed to the Rs 7 lakh crore alerted amount.