The Reserve Bank of India (RBI) will conduct a 30-day variable rate reverse repo (VRRR) auction for a notified amount of Rs 7 lakh crore on September 7 as it steps up efforts to absorb record surplus liquidity from the banking system. The auction will be conducted between 9.30 am and 10 am on Monday, with the funds scheduled to be reversed on October 7. “On a review of the current and evolving liquidity conditions, it has been decided to conduct a Variable Rate Reverse Repo (VRRR) auction on Monday, September 7, 2026,” the RBI said. Surplus liquidity in the banking system was estimated at around Rs 10.32 lakh crore as of September 3.
Premature reversal allowed
Participants will have the option to prematurely reverse the amount lent under the operation, including partially. Requests can be submitted through the RBI’s E-Kuber portal between 9 am and 5 pm on working days in Mumbai and must also be communicated to the central bank’s Financial Markets Operations Department by email.
Settlement of a premature reversal will take place at the beginning of the next working day after a request is submitted. Such requests can be made until at least two working days before the original reversal date. On the scheduled reversal date, participants’ current accounts with the RBI will be credited with the principal and accrued interest, while securities provided as collateral will be debited from their reverse repo constituent SGL accounts.
The RBI on Friday absorbed more than Rs 6.02 lakh crore from the banking system through two VRRR auctions as liquidity remained at exceptionally high levels. The central bank has intensified its absorption operations following a surge in funds generated by large foreign currency inflows.
Forex inflows boost liquidity
The RBI’s special foreign exchange measures mobilised $136.38 billion by August 31, including $127.23 billion through Foreign Currency Non-Resident (Bank), or FCNR(B), deposits. Another $5.26 billion came through overseas foreign currency borrowings (OFCBs), while external commercial borrowings (ECBs) accounted for $3.89 billion.
The strong response prompted the RBI to close the special FCNR(B) window a month ahead of schedule on August 31. The ECB and OFCB facility, however, will remain available until December 31, with further inflows expected through these routes.
Foreign currency mobilised through the measures entered the banking system, while subsequent swaps with the RBI generated additional rupee liquidity for banks. To keep short-term money-market rates aligned with the policy repo rate, the central bank has conducted 32 VRRR auctions since August, with maturities ranging from overnight to 14 days.