By Christina Titus
The Reserve Bank of India (RBI) has decided to discontinue daily variable rate repo (VRR) auction from Wednesday following a review of current and evolving liquidity conditions. The central bank will conduct its last auction on Tuesday, amounting to Rs 25,000 crore.
The RBI introduced daily VRR auctions in January 2025 to manage short-term liquidity, but with improving liquidity conditions, the central bank has decided to discontinue this measure. The termination of daily VRR comes on the backdrop of system liquidity hitting a three-year high of Rs 3 lakh crore last Tuesday. The liquidity surplus in May was Rs 1.71 lakh crore on an average and stood at Rs 2.75 lakh crore in June.
The auctions were getting meagre response on account of availability of cheaper funds in money market and increased liquidity in the banking system, dealers said. For instance, VRR auction on Monday received bids worth Rs 3,711 crore, sharply below the notified amount of Rs 25,000 crore.
“There is hardly any subscription in daily VRR auctions. Now, the liquidity has become very comfortable with RBI’s consistent measures. We are already sitting on a Rs 3-lakh-crore surplus. With this sufficient liquidity, you can get funds at the lower rate in the overnight money market,” said the treasury head at a state-owned bank.
Despite discontinuing daily VRR auction, some market participants believe that the RBI will continue 14-day VRRs.