The Reserve Bank of India (RBI) on Tuesday absorbed Rs 585 crore through a three-day Variable Rate Repo (VRR) auction, a fraction of the notified amount of Rs 75,000 crore.
Banks tendered bids worth only Rs 585 crore, all of which were accepted by the central bank. The cut-off rate was set at 5.51%, while the weighted average rate came in slightly higher at 5.52%.
The tepid response comes in contrast to the RBI’s recent liquidity absorption operations. On 12 September, the central bank had absorbed Rs 1.5 lakh crore in a three-day VRRR auction against bids of Rs 1,50,804 crore. This followed an 8-day VRRR on 4 September where Rs 1.5 lakh crore was absorbed, and a two-day VRRR on 10 September that saw Rs 20,175 crore taken out of the system.
The RBI has been actively conducting VRRR and VRR auctions of varying maturities as part of its liquidity management framework. While VRRR auctions help drain surplus liquidity, VRR operations provide funds when required, ensuring that short-term money market rates remain aligned with the policy repo rate, currently at 5.50%.