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The Reserve Bank of India has announced a seven-day variable rate repo auction worth INR 1.5 lakh crore, scheduled for the coming week, with funds set to reverse after seven days. This move comes amid a surplus liquidity of around INR 2.08 lakh crore in the banking system. Since January 2026, the RBI has injected INR 3.5 lakh crore through open market operations. The central bank's continuous liquidity support aims to maintain stable overnight rates and ease pressures from upcoming tax outflows, including advance tax and GST.
The Reserve Bank of India will carry out a seven-day variable rate repo (VRR) auction of INR 1.5 lakh crore on the upcoming Monday morning. The auction is scheduled between 9:30 AM and 10:00 AM, with the funds expected to be reversed the following Monday. Advertisement
The central bank has stated that this auction is based on current and evolving liquidity conditions in the banking system. At present, liquidity in the system is estimated to be in surplus by approximately INR 2.08 lakh crore.
Since January 2026, the RBI has infused a total of INR 3.5 lakh crore of durable liquidity through open market purchases of government securities. Over the past few months, the central bank has been actively adding large amounts of liquidity to maintain overnight interest rates within a controlled range. This has resulted in overnight rates staying significantly below the repo rate.
The heavy infusion of funds is also expected to ease the impact of upcoming outflows from the banking system. These outflows are primarily linked to advance tax payments and goods and services tax collections scheduled for this month. By providing additional liquidity, the RBI aims to ensure smooth functioning of the financial system during these periods of higher fund movements.
Source PTI
FAQ
Q1: What has the RBI announced regarding liquidity operations?
A1: The Reserve Bank of India will conduct a seven-day variable rate repo (VRR) auction worth INR 1.5 lakh crore to manage liquidity in the banking system.
Q2: When will the auction take place and how long will the funds remain?
A2: The auction is scheduled for the upcoming Monday between 9:30 AM and 10:00 AM. The funds will be reversed after seven days, on the following Monday.
Q3: Why is RBI conducting this auction?
A3: The auction is intended to manage current and anticipated liquidity conditions, maintain stable overnight rates, and ease pressures from upcoming banking system outflows such as advance tax and GST payments.
Q4: What is the current liquidity situation in the banking system?
A4: The banking system currently has a liquidity surplus of approximately INR 2.08 lakh crore.
Q5: How much liquidity has RBI infused since January 2026?
A5: Since January 2026, the RBI has injected INR 3.5 lakh crore of durable liquidity through open market operations by purchasing government securities.
Q6: How does this auction affect overnight interest rates?
A6: By injecting liquidity, the RBI helps keep overnight interest rates stable and significantly below the repo rate, ensuring smooth functioning of the financial system.
Q7: What upcoming events are influencing RBI's liquidity measures?
A7: Upcoming outflows due to advance tax payments and GST collections are expected this month, prompting the RBI to provide additional liquidity to prevent stress in the banking system.
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