The Reserve Bank of India (RBI) today absorbed 71,971 crore rupees from the banking system through an overnight Variable Rate Reverse Repo (VRRR) auction. The operation was conducted to absorb surplus liquidity from the system and align overnight money market rates with the benchmark policy repo rate.

According to an official release, the central bank fully accepted all bids received against a total notified auction size of 75,000 crore rupees. The bids were accepted at a cut-off and weighted average rate of 5.24 per cent.

As per the RBI data, currently, surplus liquidity in the banking system is estimated to be around 4.92 lakh crore rupees. To manage these conditions, the central bank also conducted two open market operations (OMO), resulting in sales of Government securities worth 50,000 crore rupees on 17th September and 25,000 crore rupees on 21st September. The final tranche of 25,000 crore rupees is scheduled for the 28th of this month.

The banking system has been flushed with liquidity primarily due to the heavy mobilization of Foreign Currency Non-Resident deposits, subsequent currency swaps with the central bank, and month-end government expenditure on salaries and pensions.