The Reserve Bank of India (RBI) has decided to discontinue daily Variable Rate Repo (VRR) auctions starting June 11, 2025. This move comes as the banking system experiences a liquidity surplus of around Rs 3 lakh crore. The RBI cited muted demand for these auctions, with banks bidding far below the notified amounts in recent auctions, as a key reason for the decision.
The VRR auctions were introduced earlier this year to address liquidity tightness caused by tax outflows and forex interventions. However, with liquidity now comfortable and overnight money market rates trending lower, the central bank sees no need to continue daily operations. Market experts anticipate that 14-day VRR auctions will still be used to manage short-term liquidity fluctuations.
This adjustment aligns with the RBI’s neutral policy stance and reflects its responsive approach to evolving market conditions. The recent CRR cut, which will release an additional Rs 2.5 lakh crore into the system, further supports this liquidity-driven strategy.