Banks offer to park higher amount with RBI via VRRR route

In an indication of excess liquidity, the Reserve Bank of India received bids worth Rs. 58,525 crore from banks against the notified amount of Rs. 50,000 crore at the variable rate reverse repo (VRRR) auction held. This is the first time in many months when the bid amount was higher than the notified amount.

RBI has been conducting VRRR auctions almost everyday to suck out liquidity but banks have been wary of parking funds.

“There is excess liquidity now therefore banks may be willing to park funds with RBI,” said a banker. Recently, RBI has been conducting two VRRR auctions on the same day.

During the past few months banks had turned reluctant to park their funds with the RBI for a longer tenure in the variable rate reverse repo auctions. The shift could indicate that RBI may conduct more VRRR auctions in the coming days.