The Reserve Bank of India has discontinued daily Variable Rate Repo (VRR) auctions starting today, in view of a liquidity surplus in the banking system, currently estimated at around 2.75 to 3 lakh crore rupees. The daily VRR auctions were launched on January 16 2025 to ease short-term liquidity tightness caused by tax-related outflows and foreign exchange interventions. However, recent auctions saw very low demand, with banks borrowing just 3,711 crore rupees on 9th June and 3,853 crore rupees on 10th June against a notified amount of 25,000 crore rupees.
This step comes soon after the RBI’s decision to cut the Cash Reserve Ratio by 100 basis points, a move expected to release 2.5 lakh crore rupees into the system in phases.
While daily VRR auctions have ended, the RBI will continue using tools like the 14-day VRR, Open Market Operations, and Standing Deposit Facility to manage liquidity as needed.
