Continuing its calibrated approach to liquidity management, the Reserve Bank of India (RBI) conducted a 2-day Variable Rate Reverse Repo (VRRR) auction on 23 July 2025, successfully absorbing Rs 50,001 crore from the banking system.
The auction drew bids totaling Rs 71,902 crore, well above the notified amount of Rs 50,000 crore, underscoring the banking system’s surplus liquidity. The cut-off rate stood at 5.53%, while the weighted average rate came in slightly higher at 5.58%. Bids at the cut-off rate were partially allotted, with a partial allotment percentage of 51.89%.
This short-term operation follows a series of recent VRRR auctions conducted by the RBI as part of its proactive liquidity calibration strategy. Just last week, on July 18, the central bank absorbed Rs 2,00,027 crore in a 7-day VRRR operation at a uniform rate of 5.49%, after receiving offers worth Rs 2,07,584 crore.
Earlier in July, multiple auctions at tenors of two and seven days witnessed strong demand, with accepted bids ranging from Rs 84,975 crore to Rs 1,51,633 crore, largely concentrated around the 5.49% yield mark. The surge in liquidity can be attributed to the RBI’s record Rs 2.69 lakh crore dividend transfer to the government and the impact of a recent Cash Reserve Ratio (CRR) cut.
The RBI’s liquidity operations aim to keep short-term interest rates aligned with the policy rate, ensuring smooth transmission of monetary policy while preventing market volatility. With inflation gradually stabilizing and credit growth remaining steady, the central bank appears focused on maintaining balanced liquidity conditions in the financial system.