Important StoriesIndia’s petroleum product exports likely to wane during October-December 2026Air India board ratifies team consolidation, cost-saving planEU move to restrict scrap export may push cost, says Jindal Stainless CEOCMRL-Exalogic case: After saying seven-day stay on probe in oral pronouncement, SC specifies freeze period as 10 days in published ordereMudhra exits the global certificate business to focus on Core Enterprise SolutionsFollow UsFOLLOW US ON WHATSAPPHomeGO BACK TO HOME THIS AD SUPPORTS OUR JOURNALISM. SUBSCRIBE FOR MINIMAL ADS. THIS AD SUPPORTS OUR JOURNALISM. SUBSCRIBE FOR MINIMAL ADS. Banks make a beeline at the VRR auction to draw liquidity Liquidity surplus in the banking system has shrunk to ₹542 crore as of October 21, 2026, down from ₹4,86,904 crore as of September 30, 2026. By BL Mumbai Bureau Updated - October 22, 2026 at 09:10 PM.×ShareWhatsAppXFacebookLinkedInMessengerRedditMailhttps://www.thehindubusinessline.com/money-and-banking/banks-make-a-beeline-at-the-vrr-auction-to-draw-liquidity/article71612631.eceCopy The RBI accepted bids aggregating ₹50,006 crore at the VRR auction at a weighted average rate of 5.55 per cent

With liquidity surplus in the banking system shrinking substantially, the RBI’s 1-day Variable Rate Repo (VRR) auction on Thursday saw banks placing bids to draw liquidity, aggregating ₹1,62,354 crore against the notified amount of ₹50,000 crore.

Liquidity surplus in the banking system has shrunk to ₹542 crore as of October 21, 2026, down from ₹4,86,904 crore as of September 30, 2026.

The RBI accepted bids aggregating ₹50,006 crore at the VRR auction at a weighted average rate of 5.55 per cent.

Gopal Tripathi, Head of Treasury and Capital Markets, Jana Small Finance Bank, said, “The reduction in liquidity in the banking system is in sync with lower forex reserves, which are down from a peak of $780 billion (in early September 2026) to $726 billion. This can be due to the maturing of short-term buy-sell swaps by the RBI and intervention in the forex market.”

“Further, ₹1.25 lakh crore has been sucked out through open market operation sales of government securities, largely normalising the liquidity post FCNR(B) deposit scheme. As liquidity is near neutral, the RBI has come out with VRR to provide liquidity for productive purposes in the banking system,” he added.

After a gap of almost three months, the RBI shifted gears on October 19th to conduct a seven-day VRR auction for ₹1 lakh crore amid overall surplus liquidity in the banking system coming down substantially.

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 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.

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