RBI reintroduces VRRR – ₹1 L Crore, 7-day auction on June 27

Mumbai, June 25

After a pause, the Reserve Bank of India has announced a 7-day Variable Rate Reverse Repo (VRRR) auction of ₹1,00,000 crore, scheduled for June 27, under the Liquidity Adjustment Facility (LAF). The maturity date is set for July 4.

The auction comes at a time when system liquidity surplus is estimated at ₹2.43 trillion as on June 23. While the size and tenor of the VRRR are significant, market participants are likely to view this as a RBI’s policy signalling, a clear message that surplus liquidity conditions will be actively managed going forward.

Talking to Bizz Buzz, Venkatakrishnan Srinivasan, Founder – Rockfort Fincap says, “The move underscores the central bank’s intent to anchor short-term rates and reduce excess liquidity-driven distortions.”

Investors and traders will closely monitor this to assess how seriously the RBI’s intent is being factored into market positioning, he said.

RBI will be holding 7-day VRRR auction as liquidity In the system is in a comfortable surplus position. The central bank has also decided to do away with its 14-day main VRR auction.

In VRRR auctions, the RBI absorbs excess liquidity from the banking system. Banks deposit surplus funds with the RBI through auctions and the interest rate is determined by competitive bidding, usually close to or above the reverse repo rate.

At the start of 2025, the RBI had been actively conducting daily and longer-tenor VRR auctions to inject short-term liquidity, responding to a period of tightness caused by tax outflows and heavy forex interventions.

These auctions allowed banks to borrow funds at market-determined rates, helping to stabilise overnight rates and ease funding pressures.

By April, the RBI began scaling back VRR operations as liquidity conditions improved. The daily VRR auction size was halved and the central bank skipped its 14-day VRR auction for several consecutive fortnights, citing a review of 'evolving liquidity conditions'.

Talking to Bizz Buzz, Anil Kumar Bhansali, Head of Treasury and Executive Director. Finrex Treasury Advisors says, “The reason to now conduct VRRR auctions also aligns with the central bank's move earlier this month when it had announced a 100-basis-point cut in the cash reserve ratio to 3 per cent. This will inject Rs 2.5 lakh crore of durable liquidity into the system and will be implemented in four tranches by the end of December.”

With liquidity now in comfortable surplus, the RBI no longer needs to rely on frequent VRR auctions to inject funds and can use VRRR auctions to manage liquidity, he said.

EoM.