RBI to conduct overnight VRR auction to infuse ₹1.25 trillion liquidity

The central bank received bids worth Rs 16,435 crore at the five-day VRR auction conducted on Wednesday, against the notified amount of Rs 1.5 trillion. The bid amount was allotted at a weighted average rate of 5.26 per cent.

The net liquidity in the banking system was in a surplus of Rs 1.50 trillion on Tuesday, the latest RBI data showed. The weighted average call rate (WACR) — the operating target for monetary policy — inched up to 5.24 per cent from the previous close of 5.21 per cent, though it remained below the policy repo rate of 5.25 per cent.

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.