The Reserve Bank of India (RBI) on Wednesday said it will conduct a 29-day variable rate reverse repo (VRRR) auction for a notified amount of Rs 2 lakh crore on Oct. 8 to absorb surplus liquidity from the banking system.
The auction will be conducted between 9.30 am and 10 am, with the amount parked with the RBI scheduled for reversal on Nov. 6, the central bank said.
The decision to conduct the auction was taken after a review of the current and evolving liquidity conditions, the RBI said.
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Currently, the liquidity in the banking system is estimated to be in surplus of around Rs 4.99 lakh crore as on Oct. 7, the RBI data showed.
The central bank said the participants will have an option for premature reversal of the amount lent in the VRRR auction.
Requests for premature reversal can be placed through the E-Kuber portal from 9 am to 5 pm on working days in Mumbai. Partial reversal of a bid will also be permitted.
The settlement of a premature reversal will take place at the start of the next working day following the date on which the request is placed.
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On the date of reversal, the participant's current account with the RBI will be credited with the principal amount and accrued interest for the period for which funds were parked with the central bank.
The securities offered as collateral by the RBI will be debited from the participant's reverse repo constituent SGL account.
Requests for premature reversal can be placed at least two working days before the original date of reversal, the RBI said.
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