Banks’ response to 7-day VRRR muted

The RBI’s overnight and seven-day Variable Rate Reverse Repo (VRRR) auctions received a mixed response from banks, despite system liquidity surplus crossing ₹3.49 lakh crore driven by FCNR inflows.

Written by FE Bureau

August 11, 2026 00:07 IST

Banks Reluctant to Commit Funds to RBI’s 7-Day VRRR as Banking Surplus Surges

The response to Monday’s variable rate reverse repo (VRRR) auctions, with overnight and seven-day tenures, was somewhat mixed, with banks apparently reluctant to park funds with the Reserve Bank of India (RBI) for too many days.

The central bank has been attempting to drain liquidity, with the surplus in the banking system touching Rs 3.49 lakh crore on August 9, having averaged Rs 3.33 lakh crore over the past week.

The seven-day VRRR saw less demand, receiving bids worth Rs 95,810 crore, against the notified amount of Rs 2 lakh crore. The overnight VRRR received a comparatively better response at Rs 58,671, against the notified amount of Rs 1 lakh crore.

Market participants observed that not too many players had anticipated the 7-day VRRR. They, however, pointed out that the tri-party repo rate, which closed at 4.99%, has been hovering close the SDF (standing deposit facility) rate of 5%. Meanwhile, the weighted average call rate (WACR) stood at 5.09% on Monday, lower than the repo rate of 5.25%.

According to data from the RBI, liquidity in July had averaged Rs 1.07 lakh crore. The increase in system liquidity has been attributed to inflows from foreign currency non-resident (FCNR) deposits.

The RBI will conduct a 3-day VRRR auction under the liquidity adjustment facility on Tuesday for Rs 1.25 lakh crore.

This article was first uploaded on August eleven, twenty twenty-six, at seven minutes past twelve in the am.