RBI overnight cash withdrawal auction: Banks park ₹3.53 lakh crore after tepid 30-day auction

Banks showed limited interest in the RBI’s variable rate reverse repo (VRRR) auctions on 7 September, despite already holding surplus funds. The central bank absorbed over ₹6 lakh crore, but bids fell below the notified amounts, PTI reported.

The weaker response was particularly visible in the auction offering a longer parking period. Banks submitted bids worth just over ₹2.59 lakh crore for the 30-day auction. This was against the Reserve Bank of India’s notified amount of ₹7 lakh crore.

The auction, announced last week, attracted bids covering only around 37%. The RBI accepted bids at the cut-off and weighted-average rates of 5.24%, according to PTI.

Following this tepid response, the central bank quickly announced another auction for overnight funds. It offered to absorb ₹5 lakh crore through this second operation.

Banks submitted bids worth ₹3,53,390 crore, covering over 70% of the amount. The stronger participation indicated banks were more comfortable parking surplus money for shorter periods.

The overnight auction was completed at 11.30 AM, with all bids accepted. Both its cut-off and weighted average rates stood at 5.24%.

These VRRR auctions help the RBI absorb excess cash in the banking system. However, Monday’s response showed that abundant liquidity did not ensure strong demand across tenures. Banking liquidity was estimated at a surplus of ₹11.16 lakh crore on 6 September.

Large inflows through the special FCNR(B) deposit scheme have added to available funds. The RBI’s special forex measures mobilised $136.38 billion by 31 August.

FCNR(B) deposits contributed $127.23 billion while OFCBs brought $5.26 billion. Another $3.89 billion came through the ECBs, according to RBI data.

Strong demand prompted the FCNR(B) window’s closure on 31 August, one month early. The ECB and OFCB facility remains open until 31 December, with further inflows expected.

Foreign currency inflows, followed by RBI swaps, supplied banks with rupee liquidity. The RBI has conducted 32 VRRR auctions so far in August and September. Their maturities ranged from overnight to 14 days.

RBI survey

On 8 September, the RBI launched three key surveys to support its monetary policy. Its next policy announcement is scheduled for 7 October.

The September household inflation expectations survey will cover 19 cities. It will assess perceived price changes and inflation based on households’ individual consumption baskets.

The urban consumer confidence survey will also cover 19 cities. It will examine views on economic conditions, employment, prices, household income and spending.

The rural survey covers rural and semi-urban areas across 31 states and Union Territories. It will collect households’ current views and expectations for the coming year.

Questions will cover economic conditions, jobs, prices, income and spending. The RBI says these findings will provide useful inputs for its forthcoming monetary policy decisions.