The Reserve Bank of India will conduct a Variable Rate Reverse Repo (VRRR) auction worth Rs 2 lakh crore on Friday to absorb excess, durable liquidity from the banking system. The date of reversal is April 17.
Banking system liquidity surplus was Rs 4.55 lakh crore as of Thursday, or about 1.8% of deposits in the banking system, according to Reuters.
Last year, the RBI discontinued the 14-day variable rate repo (VRR) and variable rate reverse repo (VRRR) operation as the main operation for managing short-term or transient liquidity under a revised liquidity management framework. Instead, it will be managed primarily through 7-day VRR/VRRR and other VRR/VRRR operations of tenors from overnight up to 14 days, at the discretion of the central bank based on its assessment of the system liquidity requirement.
The 10-year benchmark yield rose as much as 4 basis points to 7.001%, reversing an earlier decline, after the announcement.
On Wednesday, after the monetary policy decision, Governor Sanjay Malhotra said the central bank will ensure sufficient liquidity to meet product needs of economy and will be proactive and pre-emptive in liquidity management. Banking system liquidity average daily surplus was Rs 2.3 lakh crore since the March MPC meeting, he said.
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