As part of its liquidity management operations, the Reserve Bank of India, RBI, conducted a 7-day Variable Rate Reverse Repo, VRRR, auction to absorb excess liquidity from the banking system. Out of the 1 lakh crore rupees notified amount, the central bank received and accepted bids worth 84,975 crore rupees from participating banks and financial institutions.
The cut-off rate for the auction was set at 5.49 percent, while the weighted average rate, WAR, came in slightly lower at 5.45 percent. These rates reflect the interest at which the RBI temporarily borrows funds from banks under this reverse repo mechanism. The VRRR is a short-term tool under RBI’s Liquidity Adjustment Facility, used to absorb surplus liquidity at market-driven rates. It helps the RBI maintain monetary stability and control short-term interest rate volatility, reflecting its ongoing focus on effective liquidity management.
Must Read
- Advertisement -
