RBI to conduct three-day VRR auction on Tuesday, aims to infuse ₹50K crore

The Reserve Bank of India plans to conduct a three-day Variable Rate Repo (VRR) auction worth ₹50,000 crore on Tuesday to address evolving liquidity conditions in the banking system, the central bank said in a release on Wednesday.

Net liquidity in the banking system was in surplus of ₹2.2 trillion on Sunday, latest RBI data showed.

Market participants said the decision came after the weighted average call rate (WACR) surged beyond the repo rate to 5.31 per cent on Monday, against the previous close of 5.18 per cent. The policy repo rate currently stands at 5.25 per cent.

As of Monday, the WACR had inched up by 23 basis points since the first week of April.

VRR auctions allow banks to borrow funds from the RBI against government securities at market-determined rates, helping the central bank manage short-term liquidity in the financial system.

The central bank actively uses variable rate repo and reverse repo operations to keep overnight rates within the liquidity adjustment facility (LAF) corridor, bounded by the standing deposit facility (SDF) rate at the lower end and the marginal standing facility (MSF) rate at the upper end, while ensuring that the weighted average call rate remains closely aligned with the policy repo rate, the operating target of monetary policy.