RBI accepts ₹84,975 crore in VRRR auction

New Delhi

The Reserve Bank of India (RBI) on Friday announced the results of its 7-day Variable Rate Reverse Repo (VRRR) auction. The central bank accepted ₹84,975 crore from banks and financial institutions at a weighted average rate of 5.45%.

The auction was aimed at managing excess money in the banking system. RBI had set a target to absorb ₹1 lakh crore, but only ₹84,975 crore was offered by participants. The central bank accepted the full amount without any partial offers. The cut-off interest rate was set at 5.49%, slightly higher than the average accepted rate.

VRRR is one of RBI’s key tools to absorb surplus cash in the short term. Unlike the fixed-rate reverse repo, which has a set interest rate, VRRR uses an auction format where banks bid at interest rates they prefer. The final rate is then decided based on these bids.

By conducting such auctions, RBI can fine-tune liquidity in the economy and help maintain stable short-term interest rates. This particular auction result shows banks may have tighter liquidity or are choosing other options for investing their funds, which is why they offered less than the targeted amount.

RBI regularly uses VRRR to manage liquidity fluctuations and maintain balance in the financial system. This helps ensure interest rates remain in check and banks have a better environment for lending and operations.

The outcome of this auction reflects the central bank’s careful management of liquidity amid changing financial conditions, aiming to support overall economic stability.