SDG 8: Decent Work & Economic Growth
Institution: Reserve Bank of India | Ministry of Finance
The Reserve Bank of India conducted a 3-day Variable Rate Repo (VRR) auction on September 16, 2025, with a notified amount of ₹75,000 crore. Banks placed bids worth ₹585 crore, of which the full ₹585 crore was allotted at a cut-off rate of 5.51% and a weighted average rate of 5.52%.
What is VRR & Why It Matters:
A Variable Rate Repo is a short-term liquidity tool where banks borrow funds from RBI against government securities, with the interest rate decided via auction. It matters because it helps RBI fine-tune day-to-day liquidity in the financial system without changing the policy repo rate, thereby influencing money market rates, credit availability, and monetary transmission.
This auction’s small demand relative to the notified amount signals that liquidity in the banking system is currently adequate, reducing the need for large injections. Monitoring VRR results is crucial for policymakers and markets, as they serve as real-time indicators of liquidity stress or surplus in the financial system and help guide RBI’s broader liquidity management strategy.
Relevant Question for Policy Stakeholders:
Do current VRR outcomes suggest that RBI should recalibrate its liquidity operations, or are existing conditions sufficient to support stable credit flows and inflation management?
Follow the full news here:
https://rbidocs.rbi.org.in/rdocs/PressRelease/PDFs/PR1104848ABFEB6CFF412FB491740C26097788.PDF