The Reserve Bank of India will conduct an overnight variable rate repo (VRR) auction on Monday, amounting Rs 1 lakh crore, it said in a release on Friday. The auction will be held between 9.30 a.m. and 10.00 a.m. and the reversal will happen on Tuesday.
Understanding the need for a VRR auction
The RBI conducted two VRR auctions on Friday with tenures of six days and three days. Participants bid Rs 59,967 crore against the notified amount of Rs 1 lakh crore in the six-day VRR auction, while three-day auction received bids worth Rs 390 crore against the notified amount of Rs 50,000 crore.
Market response and liquidity trends
The RBI has been conducting VRR auctions since September 16 as systemic liquidity fell because of tax outflows. The banking system’s liquidity stood at Rs 72,774 crore as on September 18. It was Rs 63,745 crore on September 17 and Rs 1.90 lakh crore on September 15.