RBI: Result of 6-day VRRR auction held on Aug 08, 2025 Aug 08

RBI: Result of 6-day VRRR auction held on Aug 08, 2025 Aug 08

The Reserve Bank of India (RBI) conducted a 6-day Variable Rate Reverse Repo (VRRR) auction on August 8, 2025, as part of its ongoing efforts to manage liquidity in the banking system. The auction, which aimed to absorb surplus liquidity, was held to anchor short-term rates closer to the policy repo rate.

The VRRR auction saw a total absorption of Rs 2.8 trillion, according to the latest data from the RBI. This amount was drawn from the banking system, which had a surplus of Rs 4 trillion. The auction was part of the RBI's strategy to manage excess liquidity and stabilize short-term interest rates.

Market participants noted that the central bank's objective was to absorb the maturing amount of over Rs 2.8 trillion, while system liquidity remained in surplus at around Rs 4 trillion. On Wednesday, net liquidity in the banking system stood at a surplus of Rs 3.90 trillion.

Gaura Sen Gupta, chief economist at IDFC FIRST Bank, commented on the auction, stating, "They are trying to absorb the maturing amount. We have around Rs 4 trillion of surplus liquidity and around Rs 1.6 trillion in the Standing Deposit Facility (SDF), and the tax payments are scheduled around 20 August, hence they want to absorb the excess funds over six and three days."

The VRRR operations are aimed at absorbing surplus liquidity from the system and anchoring short-term rates closer to the policy repo rate. This helps in maintaining financial stability and ensuring that the banking system operates efficiently.

References:
[1] https://www.business-standard.com/industry/banking/rbi-vrrr-auctions-liquidity-absorption-3-trillion-banking-125080701737_1.html