RBI announces seven-day VRR auction worth ₹1 trillion next week

The Reserve Bank of India (RBI) will conduct a seven-day Variable Rate Repo (VRR) auction worth Rs 1 trillion on Monday to address evolving liquidity conditions in the banking system, the central bank said in a release on Friday.

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The net liquidity in the banking system was in a surplus of Rs 2.17 trillion on Thursday, the latest data from the RBI showed.

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.

The weighted average call rate (WACR) — the operating target of monetary policy — inched up to settle at 5.24 per cent on Friday, against the previous close of 5.21 per cent. The policy repo rate currently stands at 5.25 per cent.