The Reserve Bank of India (RBI) on Monday (June 9) said it will discontinue its daily variable rate repo (VRR) auctions from June 11, following a review of current and evolving liquidity conditions in the banking system.
The central bank had introduced the daily VRR auctions in January this year to manage short-term liquidity, with reversals scheduled for the next working day. These auctions were conducted on all working days in Mumbai.
In a notice issued today (June 9), the RBI said it will conduct the final daily VRR auction on Tuesday, June 10, with a notified amount of ₹25,000 crore. The auction will be held between 10-10.30 am.
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The daily variable rate repo (VRR) auction is a short-term liquidity tool used by the Reserve Bank of India (RBI) to manage day-to-day liquidity in the banking system. Under this mechanism, banks can borrow funds from the RBI by offering government securities as collateral. The interest rate is determined through an auction process, hence the term ‘variable rate.’
Unlike fixed rate repos, VRR auctions allow market forces to decide the rate. The daily VRR operations are typically used when the RBI wants to ensure smooth liquidity without creating long-term distortions.
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(Edited by : Shoma Bhattacharjee)