“In view of the moderation in surplus liquidity, it has now been decided to merge 28-day VRRR with the 14-day VRRR. Consequently, from now, only 14-day VRRR auction will be conducted,” RBI governor Shaktikanta Das said, while detailing the RBI’s monetary policy statement.
“Fine-tuning operations of various maturities will be conducted for injection as well as absorption of liquidity as may be necessary from time to time.”
Banking system liquidity slipped into deficit earlier this month and has largely remained that way since then. It currently stands at a deficit of $2.29 billion.
The liquidity is likely to remain in deficit in the second half of this financial year as credit growth picks up and the circulation of currency notes rises, analysts said.
The RBI has been conducting 28-day VRRR auctions for since November 2021, but these auctions have not been fully subscribed for the last few months.