Main note - [Money Market Operations (MMO)](Money%20Market%20Operations%20(MMO).md) RBI has been conducting second VRRR auctions since August 10. Today's (August 31, 2026) first auction, a 15-day tenor, was the longest since October 30, 2024. 1. <span style="color:#0047AB;">How much was the highest absorption under VRRR since 8th June and Aug-31, 2026?</span> 1. Under the 15-day VRRR facility, ₹1,34,625 crore was absorbed against a ₹6 lakh crore notified amount, just approx. 22% subscribed. This could possibly be due to the upcoming tax deadline, which would move liquidity out of banks and into government accounts with RBI. Also, the liquidity distribution from the forex swaps with RBI is also uneven. 2. In the second (1-day tenor) VRRR auction for ₹4 lakh crore which closed by 11:30 am, ₹2,49,840 crore was deposited by banks, which is ~62% subscription. The total absorption of ₹3,84,465 crore for the day is also the highest liquidity absorption under VRRR since the launch of the swap window. 2. <span style="color:#0047AB;">Are lower rates transmitting to the money markets? </span> 1. The volume in repos remained higher. TREPS includes non-bank entities (mutual funds, insurance companies, NBFCs, etc.) but have no direct access to RBI's LAF. So banks still holding surplus after the 11:30 am VRRR cutoff were seen competing with non-bank money for the smaller pool of borrowers. 3. <span style="color:#0047AB;">What are the alternative tools?</span> 1. RBI may conduct shorter-tenor like 5, 7-days but repetitive VRRR auctions in this week. As the surplus stays for longer, RBI may consider other tools beyond VRRR. 2. Related note - [RBI's Liquidity Toolkit - Which One Wins? (Aug-2026)](RBI's%20Liquidity%20Toolkit%20-%20Which%20One%20Wins?%20(Aug-2026).md) 4. <span style="color:#0047AB;">How large is the surplus?</span> 1. Surplus system liquidity, defined by net outstanding absorption by RBI under LAF adjusted (minus) for excess reserves maintained by banks, stood at ₹5,09,248.71 crore as on August 30, 2026, which is roughly 2% of NDTL (banks' total deposit base) as on Aug-15. The COVID-19 pandemic peak was around 6%. 2. The ratio, and not just the absolute amount, helps to give idea if the surplus is large enough to disrupt policy transmission. 5. <span style="color:#0047AB;">What is the risk of leaving large durable liquidity with banks for too long?</span> 1. Some analysis like Cook and Yetman (2012), have argued that there is some some correlation between excessive credit growth and foreign exchange asset accumulation, if left unsterilised. ## Related Notes 1. [Money Market Operations (MMO)](Money%20Market%20Operations%20(MMO).md) 2. [RBI's Liquidity Toolkit - Which One Wins? (Aug-2026)](RBI's%20Liquidity%20Toolkit%20-%20Which%20One%20Wins?%20(Aug-2026).md) 3. [Liquidity Adjustment Facility (LAF)](Liquidity%20Adjustment%20Facility%20(LAF).md) 4. [Repos and Tri-Party Repo](Repos%20and%20Tri-Party%20Repo.md) 5. [Monetary Policy Frameworks in India](Monetary%20Policy%20Frameworks%20in%20India.md) 6. [Monetary Policy Decisions in the RBI - The Structure](Monetary%20Policy%20Decisions%20in%20the%20RBI%20-%20The%20Structure.md)