RBI Absorbs Surplus Liquidity Through Variable Rate Reverse Repo Auctions

Banks had much more cash than they immediately needed.

The RBI used special auctions to temporarily take some of that cash from banks.

One report says it took ₹2.90 lakh crore through two auctions.

Another says it took ₹3.93 lakh crore through one auction.

The reports therefore describe different auction totals and liquidity estimates.

The RBI said these actions would help keep short-term interest rates near its main rate.

Extra cash came partly from foreign-currency deposits exchanged for rupees and from government spending.

The RBI also plans to sell government securities to remove more money from the banking system.

Plenty of cash may make loans cheaper, but banks may offer less attractive rates on new fixed deposits.