Reserve Bank of India Absorbs Rs 2.23 Lakh Crore Surplus

The Reserve Bank of India absorbed Rs 2.23 lakh crore from the banking system on September 18 through a Variable Rate Reverse Repo auction. The central bank accepted bids totaling Rs 2,22,629 crore at a weighted average rate of 5.24 per cent to manage a surplus estimated at Rs 6.94 lakh crore. This liquidity surge was driven by month-end government expenditures and heavy mobilization of foreign currency non-resident deposits.

To further drain excess funds, the bank sold government securities worth Rs 50,000 crore via Open Market Operations on September 17, with two additional sales of Rs 25,000 crore each scheduled for September 21 and September 28. These measures aim to align short-term money market rates with the policy repo rate.

Simultaneously, the central bank reported that India's foreign exchange reserves fell by $4.9 billion to $780.8 billion for the week ending September 11. This represents the first decrease after 10 weeks of growth, including a previous record weekly increase of $44.9 billion. The decline resulted from a $2.4 billion drop in foreign currency assets and a $2.6 billion decrease in gold reserves. The bank has utilized special swap measures to mobilize $136.4 billion in foreign currency inflows to manage volatility and absorb excess rupee liquidity.