System liquidity remained in surplus during July and August amid higher government spending

RBI stated in its latest monthly update that system liquidity remained in surplus during July and August (up to August 21), primarily driven by higher government spending. The average daily net absorption under the liquidity adjustment facility stood at Rs 3.07 lakh crore during July 16 to August 21, 2025, marginally lower than in the preceding one-month period. During this period, to absorb excess liquidity which was exerting downward pressure on the overnight money market rates, the Reserve Bank conducted 12 variable rate reverse repo (VRRR) auctions (overnight to 8-day). To tide over temporary liquidity tightness due to tax related outflows, the Reserve Bank also conducted three variable rate repo (VRR) auctions of 2-day and overnight maturity. The banks' recourse to the marginal standing facility remained low on easy liquidity conditions.