The Reserve Bank of India used two Variable Rate Reverse Repo auctions to absorb surplus banking funds. Banks submitted ₹2,59,276 crore for the 30-day window, against an intended absorption of ₹7 lakh crore. Overnight bids totalled ₹3,53,390 crore, compared with the RBI’s ₹5 lakh crore target.

The weighted average interest rate was identical at 5.24% for both tenures. The difference in participation therefore pointed towards access to cash rather than a better auction return. With quarter-end approaching, banks preferred not to commit funds for a month when corporate lending opportunities could offer higher earnings.

System-wide surplus liquidity increased by more than ₹4.5 lakh crore between late August and September 6, reaching ₹11,16,006.50 crore. Experts expected it could approach ₹12 lakh crore. Much of the inflow was attributed to foreign-currency deposits from NRIs under FCNR(B), with banks collecting $127.23 billion.

Those deposits followed an RBI concessional currency-swap arrangement offered during June-August. Tamilnad Mercantile Bank’s K Arvind highlighted banks’ cautious approach to deploying surplus funds while loan demand was improving. September 11, the deadline for completing swaps with the RBI, was identified as the next point to watch for signs of liquidity stabilising.