The Reserve Bank of India (RBI) has announced another liquidity withdrawal operation on 7 September. It will hold an overnight variable rate reverse repo (VRRR) auction worth ₹5 trillion. This followed weak participation in a longer auction aimed at withdrawing ₹7 trillion.
Banks offered only ₹2.59 trillion in that auction, which allowed early redemption. Five traders blamed technical problems for the weak response, according to ET.
One said a platform change prevented some banks from participating.
“The bidding for the VRRR was changed to another platform, as E-Kuber, the usual one, had some technical issues, and hence some banks were caught unaware and were not able to participate,” ET quoted the trader as saying.
However, another person denied the technical problems. The trader told Reuters that all bids had passed through the e-Kuber system. The did not respond to Reuters’ request for comment.
India’s banking liquidity surplus reached ₹11.6 trillion on 6 September, nearly 4% of deposits. Sustained surplus liquidity could increase inflation and boost financial asset prices.
The RBI recently indicated possible rate increases as inflation and growth strengthen. A treasury official expects another longer reverse repo auction this week.
“Even though the response was not up to the mark, we could see another long-duration reverse repo later in the week,” the treasury official told Reuters.
(This is a developing story. Check back for more updates.)