RBI bid to drain surplus liquidity and improve rate transmission sees muted
Benchmarks Nifty23,146.15148.81FEATURED FUNDS★★★★★UTI Aggressive Hybrid Fund Regular Plan-Growth5Y Return8.69 % Invest NowFEATURED FUNDS★★★★★Motilal Oswal Midcap Fund Direct-Growth5Y Return18.78 % Invest NowEnter search…
RBI bid to drain surplus liquidity and improve rate transmission sees muted response
RBI bid to drain surplus liquidity and improve rate transmission sees muted response
By Atmadip Ray, ET BureauLast Updated: Oct 08, 2026, 07:03:00 PM ISTSynopsisBanks parked just Rs 79,655 crore in the central bank’s 29-day variable rate reverse repo (VRRR) auction, less than half the Rs 2 lakh crore absorption planned in the offer. Draining liquidity is considered crucial for quicker and effective transmission of increases in policy rates.
Listen to this article in summarized format
Loading...×Kolkata: The central bank’s first major bid Thursday to drain surplus liquidity and improve transmission of its first rate increase in nearly four years met with a muted response.Banks parked just Rs 79,655 crore in the central bank’s 29-day variable rate reverse repo (VRRR) auction, less than half the Rs 2 lakh crore absorption planned in the offer. Draining liquidity is considered crucial for quicker and effective transmission of increases in policy rates.
The weak response to the long-term VRRR came despite the Reserve Bank of India (RBI) allowing banks to withdraw funds on a two-day notice. The RBI had said while announcing its latest policy review that it would use various liquidity-management tools to improve transmission of the rate hike.
Also read | One GST return a year? New scheme could ease compliance for 16 lakh small businesses
"Banks with visibility of 30 days of surplus liquidity participated in the 29-day VRRR. Although RBI offers the call option, several banks do not take part in long term VRRR as the RBI offers the daily VRRR option," a treasury head with a private sector bank said.
Live Events
The RBI absorbed Rs 1.61 lakh crore Thursday using the daily VRRR against a notified amount of Rs 2 lakh.
Governor Sanjay Malhotra Wednesday said that the surplus liquidity is expected to drain out by the end of the current fiscal. He said that the central bank would use an appropriate mix of liquidity management tools and strive to align the weighted average call rate (WACR) with the policy repo rate.
To be sure, the central bank also said it expects credit offtake to remain robust and the festive season should help drain excess liquidity.
The inter-bank market was sitting on Rs 4.24 lakh crore of surplus at the end of October 7, RBI data showed.
Also read | GST Council Meeting 2026: Tax officers' arrest powers scrapped, prosecution threshold raised to Rs 5 crore; no rate changes
Although monetary transmission happens automatically for the repo-linked loans, marginal cost-based pricing takes a little time to adjust to the new policy rate.
Deposit rates, on the other hand, are not expected to rise immediately since banks have enough lendable resources at present backed by the foreign-currency linked deposit cushion.
During August and September, system liquidity increased substantially on account of the RBI's dedicated dollar mobilisation programme, which was followed up by a dollar-rupee swap. The system liquidity stood at an average daily surplus of Rs 5.9 lakh crore since early August 2026, RBI said.
Add as a Reliable and Trusted News Source Add Now!
(You can now subscribe to our ETMarkets WhatsApp channel)
Read More News onReserve Bank of Indiainterest rate increaseliquidity managementsurplus liquidityrepo raterbi rate hike
(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)
Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price
...moreless(You can now subscribe to our ETMarkets WhatsApp channel)
Read More News onReserve Bank of Indiainterest rate increaseliquidity managementsurplus liquidityrepo raterbi rate hike
(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)
Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price
...morelessPrime ExclusivesInvestment IdeasStock Report PlusePaperWealth EditionUS mid-term elections – Part 2: What does it mean for Trump to lose control of Congress?
The ABCD of the US mid-term elections – Part 1: Why it matters across the globe
Curbing rupee bets: What the RBI’s new rules mean for the hedge-now-or-wait question
Brinjal, buffalo, bacteria: Inside India’s pay-for-nature system
Homebuyers wait as NCLT panel picks holes in unfinished Jaypee projects
The NBFC saga - Part 3: How one default in 2018 changed the way RBI reads risk
- 1
- 2
- 3
& personalised newslettersLogin NowUnlimited AccessStarting @ Rs120/monthGet access to exclusive stories, expert opinions &
in-depth stock reportsSubscribe NowET
Unlock Access to All Exclusives with ETPrime FREE TRIAL
15 Days Free: Unlock All ETPrime Exclusives, Market Tools & ePapers
Trial offer expiring in00 : 05 : 00
I'd rather pay ₹2599 nowUh-oh! This is an exclusive story available for selected readers only.
Worry not. You’re just a step away.
Prime Account Detected!
It seems like you're already an ETPrime member with
Login using your ET Prime credentials to enjoy all member benefits
Log out of your current logged-in account and log in again using your ET Prime credentials to enjoy all member benefits.
Unlock ETPrime's Exclusive Stories Today!
Big Price Drop! Flat 40% Off
Student Only OfferAlready a Member? Sign In nowAlready a Member? Sign In nowAlready a Member? Sign In nowOffer Exclusively For You
Save up to Rs. 700/-
ON ET PRIME MEMBERSHIP
Avail OfferOffer Exclusively For You
Get 1 Year Free
With 1 and 2-Year ET prime membership
Avail OfferOffer Exclusively For You
Get 1 Year Free
With 1 and 2-Year ET prime membership
Avail OfferOffer Exclusively For You
Get Flat 40% Off
Then ₹ 1749 for 1 year
Avail OfferOffer Exclusively For You
ET Prime at ₹ 49 for 1 month
Then ₹ 1749 for 1 year
Avail OfferSpecial Offer
Get flat 40% off on ETPrime
Avail OfferAvail OfferClaim NowAlready a Member? Sign In nowNeed Assistance?
Connect with an ETPrime expert for personalized support and guidance
+91 9484700004'; }); } if(listing) { var h3 = "You tried reading " + listArr.length + " locked stories in the past " + threshold + " days.", h4 = "Become an ET Prime member and don't miss out on these exclusive stories."; var html = '' + h3 + '
' + h4 + '
- ' + listing + '
What’s Included with
ETPrime Membership
1Exclusive Insights That Matter
Uncover the truth with our investigative stories
Make strategic moves using the real-world case studies
Read industry-specific stories to identify emerging trends
Spot opportunities with in-depth insights that matter
Trump temper on H-1B visas is forcing Indians to do these things to stay put in US
What Adani’s US indictment means for India Inc’s overseas fundraising
Why veterans like Reliance, L&T are on acquisition spree? Aswath Damodaran has an answer.
Will China’s dollar bond sale in Saudi Arabia trump the US in financial world?
Huawei launches its own OS to compete with Google and Apple. But can it win beyond China?
The problem with lab grown diamonds
Why a falling rupee is a better option for the economy
A list of top 20 momentum stocks that have delivered massive returns in one year
2Invest Wisely With Smart Market Tools & Investment Ideas
Alpha Trade
Get daily trade ideas from SEBI-registered research analysts.
Investment Ideas
Grow your wealth with stock ideas & sectoral trends.
Stock Reports Plus
All-in-one stock research with Stock Score, peer comparison & key signals.
BigBull Portfolio
Get to know where the market bulls are investing to identify the right stocks.
Stock Analyzer
Check the score based on the company's fundamentals, solvency, growth, risk & ownership to decide the right stocks.
Market Mood
Analyze the market sentiments & identify the trend reversal for strategic decisions.
Stock Talk Live at 9 AM Daily
Ask your stock queries & get assured replies by ET appointed, SEBI registered experts.
3Stay informed anytime, anywhere with ET ePaper
ePaper - Print View
Read the PDF version of ET newspaper. Download & access it offline anytime.
ePaper - Digital View
Read your daily newspaper in Digital View & get it delivered to your inbox everyday.
Wealth Edition
Manage your money efficiently with this weekly money management guide.
TOI ePaper
Read the PDF version of TOI newspaper. Download & access it offline anytime.
Deep Explainers
Explore the In-depth explanation of complex topics for everyday life decisions.
Health+ Stories
Get fitter with daily health insights committed to your well-being.
Personal Finance+ Stories
Manage your wealth better with in-depth insights & updates on finance.
5Enjoy Complimentary Subscriptions From Top Brands
Stream new documentaries from all across the world every day.
Stories you might be interested in
Figures reflect the source report and its stated period. This article is for information and is not investment advice.
