RBI announces Rs 2 lakh crore VRRR auction to absorb excess liquidity

Mumbai — The Reserve Bank of India has announced a Rs 2 lakh crore seven-day Variable Rate Reverse Repo (VRRR) auction scheduled for April 17, aimed at managing surplus liquidity in the banking system.

According to the central bank, the move comes in response to temporary excess liquidity conditions. The auction will take place between 9:30 AM and 10:00 AM, with funds set to be reversed on April 24.

This step is intended to absorb excess cash from the system, particularly ahead of routine outflows around the 20th of each month due to GST payments. Such outflows typically tighten liquidity and influence short-term money market rates. By aligning the timing of the operation, the RBI aims to keep overnight rates stable and maintain balanced liquidity.

As of April 15, the banking system is estimated to be in surplus by around Rs 5.22 lakh crore, reflecting significant cash availability with banks.

The RBI had conducted a similar VRRR auction on April 10, absorbing over Rs 2 lakh crore, with those funds maturing on April 17 — the same day as the new operation.

RBI Governor Sanjay Malhotra recently reiterated the central bank’s proactive stance on liquidity management, stating that the RBI will continue to ensure adequate liquidity to support economic activity while preserving financial stability.

In a related move, the RBI last month extended the enhanced export credit period of up to 450 days until June 30, 2026, to support exporters dealing with disruptions caused by the ongoing West Asia crisis and related logistical challenges.

WIth inputs from IANS