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The banking system was flushed with liquidity due to heavy mobilisation of FCNR (B) deposits by banks
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Moneycontrol•09-10-2026, 15:58
RBI's Long-Term VRRR Auctions See Tepid Response as Banks Prefer Shorter Tenures
  • •The Reserve Bank of India's 10-day variable rate reverse repo auction received bids worth Rs 18,170 crore against the notified amount of Rs 1.50 lakh crore.
  • •In contrast, a three-day VRRR auction attracted much stronger participation with bids worth Rs 1,39,847 crore.
  • •Banking system liquidity currently sits at a surplus of around Rs 3.88 lakh crore, driven by FCNR(B) deposits and government expenditure.
  • •The RBI has been conducting various VRRR auctions to absorb excess liquidity and align money market rates to the repo rate.
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Key Questions Answered

Banks showed a tepid response because lenders prefer parking their surplus funds with the central bank for shorter durations rather than committing them to longer tenures.

The banking system became flushed with liquidity due to heavy mobilization of FCNR (B) deposits bringing foreign currency into the system, subsequent swaps with the RBI providing rupee liquidity, and month-end government expenditures like salaries and pensions.

According to RBI Governor Sanjay Malhotra, the excess liquidity will be absorbed through various means, including currency leakage, the central bank's liquidity operations, and banks' reserve requirements.

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