RBI conducts ₹1 lakh cr Variable Rate Repo auction to push liquidity into banking system

As the surplus gradually comes down and moves towards a small deficit, it will help in transmission of the recent 25 basis points repo rate hike to deposit and lending rates. | Photo Credit: FRANCIS MASCARENHAS

The Reserve Bank of India (RBI) on Monday shifted gears to conduct a seven-day Variable Rate Repo (VRR) auction for ₹1 lakh crore amid overall surplus liquidity in the banking system coming down substantially.

This is significant as the central bank last conducted a VRR auction to push liquidity into the banking system on July 29, 2026.

RBI has been in liquidity absorption mode since August 6th, conducting Variable Rate Reverse Repo (VRRR) auctions, to drain out the surplus liquidity generated due to mobilisation of FCNR (B) deposits by banks under the RBI’s limited period swap window for a limited period (June 8 - August 31).

The central bank on Monday received bids aggregating ₹1,50,735 crore against the notified amount of ₹1 lakh crore to draw funds from the central bank at the seven-day VRRR auction. It accepted bids aggregating ₹1,00,014 crore at a weighted average rate of 5.52 per cent.

As the surplus gradually comes down and moves towards a small deficit, it will help in transmission of the recent 25 basis points repo rate hike to deposit and lending rates.

The average daily net absorption under the liquidity adjustment facility, which is an indicator of the liquidity position in the banking system, increased from ₹1.2 lakh crore in July 2026 to ₹5.8 lakh crore in August and further to ₹7.8 lakh crore in September. Surplus liquidity in the banking system has come down to ₹1,85,873 crore as on October 18, 2026, per latest RBI data.

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