: Friday, 04 July 2025 4:39 pm
Mumbai . The Reserve Bank of India (RBI) on Friday withdrew Rs 1,00,010 crore from the banking system through a seven -day variable rate reverse repo (VRR) auction.
The move aims to reduce the additional liquidity currently present in the banking system. According to an RBI statement, it received bids worth Rs 1,70,880 crore during the auction.
The central bank said in its statement, “Of this, the central bank accepted Rs 1,00,010 crore at a cut-off rate of 5.47 percent.”
The move is expected to reduce surplus liquidity and may increase the short-term overnight rate.
According to the latest RBI data, till July 3, the banking system had a liquidity surplus worth about 4.04 lakh crore rupees.
Despite the previous liquidity absorption efforts, the system remained in the surplus, mainly due to government flows such as salary and pension disbursement at the end of the month.
In addition, the ridges of government bonds and coupon payment increased more liquidity. Only last week, the Reserve Bank withdrawn Rs 84,975 crore from the system through a similar VRR auction.
However, the surplus remained high. The RBI regularly conducts VRRR auction to manage liquidity in the system and keep the short-term interest rate in line with its monetary policy.
Meanwhile, the central bank directed banks and financial institutions not to impose any pre-payment fee on floating rate loans and advances taken by individuals and MSE for commercial purposes.
These revised guidelines will apply to all the loans approved or then approved on or after January 1, 2026.
As per the current rules, banks and non-banking financial companies (NBFCs) have already been barred from putting foreclosure or pre-payment penalty on floating rate-term loans taken by individuals for non-commercial purposes. However, the latest instructions indicate a significant expansion, which now also provides benefits on business-related loans.
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Web Title-RBI withdraws Rs 1 Lakh Crore from Banking System Through VRR Auction to Deal with Surplus Liquidity
