The Reserve Bank of India announced on Friday that it is carrying out a Variable Rate Reverse Repo (VRRR) auction worth INR 2 lakh crore with a 7-day tenor to absorb excess
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MUMBAI — The Reserve Bank of India announced on Friday that it is carrying out a Variable Rate Reverse Repo (VRRR) auction worth Rs 2 lakh crore with a 7-day tenor to absorb excess, durable liquidity from the banking system. The date of reversal is April 17.
The VRRR is used to absorb excess liquidity when the system has a surplus, which helps maintain interest rates within the RBI's prescribed corridor.
This move follows the RBI's revised liquidity management framework, which prioritises VRRR to manage liquidity over long-term repo operations.
The auction aims to withdraw liquidity, often used to counteract surplus funds and maintain stability in the monetary system. This action is part of the central bank's broader strategy to manage liquidity conditions and maintain the stability of the financial system.
Last year, the RBI discontinued the 14-day Variable Rate Repo (VRR) and Variable Rate Reverse Repo (VRRR) operations as the main operation for managing short-term or transient liquidity under a revised liquidity management framework. Instead, it is now managed primarily through 7-day VRR/VRRR and other VRR/VRRR operations of tenors from overnight up to 14 days, at the discretion of the RBI based on its assessment of the liquidity requirement for the system.
Meanwhile, the RBI is also implementing the Government of India’s programme of borrowing of Rs 8.20 lakh crore during the first half (H1) of the financial year 2026-27, which was announced earlier.
Gross market borrowings in the Budget estimate (BE) 2026-27 were fixed at Rs 17.20 lakh crore. Since the presentation of the Budget, switches of G-Sec were conducted, reducing gross market borrowing to Rs 16.09 lakh crore. As much as Rs 8.20 lakh crore, which works out to 51 per cent of the total amount, is planned to be borrowed in the first half (April-Sept) of the financial year 2026-27. The borrowing will be done through the issuance of dated securities, including Rs 15,000 crore of Sovereign Green Bonds (SGrBs).