Industry Odisha Bureau, Sept 04: The Reserve Bank of India will hold a 30-day VRRR auction Monday. It targets absorbing Rs 7 lakh crore from the banking system. Excess liquidity followed special dollar-mobilisation programmes and forex inflows. RBI is addressing unusually high liquidity conditions across the market.
Banking-system surplus surged to Rs 10.3 lakh crore. This record level was recorded as of September 3, 2026. Forex-inflow programmes generated inflows exceeding $130 billion recently. FCNR-B and other schemes drove much of this mobilisation. Subsequent dollar-rupee swaps added further to rupee liquidity.
That surplus pushed money-market rates well below RBI’s target. The weighted call money rate fell to 4.95%. RBI’s policy repo rate currently stands at 5.25%. The central bank typically seeks overnight rates near that level. Abundant liquidity has complicated that alignment recently.
RBI has conducted VRRR auctions almost daily to manage surplus. The 30-day operation marks a shift toward durable absorption. Analysts view this as addressing liquidity on a longer basis. Persistent surplus liquidity could add pressure to inflation over time.
ICICI Securities expects durable liquidity to keep climbing further. The brokerage projects a surplus crossing Rs 15 lakh crore. That would occur by the end of September, it said. Core liquidity stood at Rs 8.06 lakh crore on August 15. Flows from FCNR-B and related schemes are driving this increase.
Banks participating in Monday’s auction retain some operational flexibility. RBI allows premature reversal for banks that request it. Such requests must come at least two working days ahead. This applies before the original reversal date under the auction.ro
Friday’s three-day VRRR auctions saw more moderate participation levels. RBI mobilised Rs 6.02 lakh crore across two separate auctions. That fell short of the Rs 8.51 lakh crore notified target. Participation gaps suggest banks retained some funds despite surplus conditions.
RBI also managed liquidity through government securities sales Friday. It sold two papers worth Rs 32,000 crore combined. A new five-year stock saw a cut-off yield of 6.53%. The 7.71% 2066 stock priced at a 7.6618% yield.
These operations reflect RBI’s broader liquidity-management challenge ahead. Surplus funds continue building despite frequent absorption efforts. VRRR auctions do not guarantee immediate reductions in liquidity. Forex-linked liquidity may remain elevated even with active intervention.
The central bank’s approach signals continued vigilance without altering policy stance. Absorption operations remain distinct from any repo-rate adjustment. RBI appears focused on managing surplus while avoiding inflation risks. Market conditions will likely shape further liquidity operations through September.
