{"id":123768,"date":"2026-09-10T12:50:12","date_gmt":"2026-09-10T07:20:12","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=123768"},"modified":"2026-09-10T12:50:42","modified_gmt":"2026-09-10T07:20:42","slug":"rbi-%e2%82%b96-lakh-crore-vrrr-auction","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/rbi-%e2%82%b96-lakh-crore-vrrr-auction\/","title":{"rendered":"RBI \u20b96 Lakh Crore VRRR Auction, Latest News, Details &#038; Significance"},"content":{"rendered":"<p><b>RBI \u20b96 Lakh Crore VRRR Auction<\/b><span style=\"font-weight: 400;\"> refers to the Reserve Bank of India\u2019s recent move to absorb excess liquidity from the banking system through <\/span><b>Variable Rate Reverse Repo (VRRR) auctions<\/b><span style=\"font-weight: 400;\">. The operation came amid a sharp rise in surplus funds, which had pushed short-term interest rates below the RBI\u2019s policy rate. Through VRRR auctions, the RBI aims to manage liquidity conditions and keep money-market rates aligned with its monetary policy stance<\/span><\/p>\n<h2><b>RBI \u20b96 Lakh Crore VRRR Auction Latest News<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Liquidity Absorption:<\/b><span style=\"font-weight: 400;\"> The <\/span><a href=\"https:\/\/vajiramandravi.com\/upsc-exam\/reserve-bank-of-india\/\" target=\"_blank\"><b>Reserve Bank of India<\/b><\/a><b> (RBI)<\/b><span style=\"font-weight: 400;\"> absorbed <\/span><b>\u20b96.02 lakh crore<\/b><span style=\"font-weight: 400;\"> from the banking system through two <\/span><b>three-day Variable Rate Reverse Repo (VRRR) auctions<\/b><span style=\"font-weight: 400;\"> as surplus liquidity remained at a record high.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Auction Details:<\/b><span style=\"font-weight: 400;\"> Against the notified amount of <\/span><b>\u20b97 lakh crore<\/b><span style=\"font-weight: 400;\">, banks placed bids worth <\/span><b>\u20b95.41 lakh crore<\/b><span style=\"font-weight: 400;\">, while another auction with a notified amount of <\/span><b>\u20b91.5 lakh crore<\/b><span style=\"font-weight: 400;\"> received bids worth <\/span><b>\u20b960,419 crore<\/b><span style=\"font-weight: 400;\">. Both auctions were conducted at a <\/span><b>cut-off rate of 5.24%<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Record Surplus:<\/b><span style=\"font-weight: 400;\"> Banking-system liquidity stood at around <\/span><b>\u20b910.32 lakh crore<\/b><span style=\"font-weight: 400;\">, reflecting a significant surplus of funds. The surplus had reached a fresh record as banks held more funds than required for their immediate needs.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Recent Operations:<\/b><span style=\"font-weight: 400;\"> The RBI has significantly increased liquidity absorption through VRRR auctions. Between August and early September, it conducted <\/span><b>32 VRRR auctions<\/b><span style=\"font-weight: 400;\">, with maturities ranging from overnight to 14 days.<\/span><\/li>\n<\/ul>\n<h2><b>What is the RBI VRRR Auction?<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Meaning:<\/b><span style=\"font-weight: 400;\"> A <\/span><b>Variable Rate Reverse Repo (VRRR) auction<\/b><span style=\"font-weight: 400;\"> is a monetary policy tool used by the <\/span><b>RBI to absorb excess liquidity<\/b><span style=\"font-weight: 400;\"> from the banking system.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>How It Works:<\/b><span style=\"font-weight: 400;\"> Under a VRRR auction, banks temporarily park their surplus funds with the RBI for a specified period. The RBI accepts bids at variable interest rates, helping manage the amount of liquidity available in the financial system.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Difference from Fixed Reverse Repo:<\/b><span style=\"font-weight: 400;\"> Unlike the traditional <\/span><b>fixed-rate reverse repo<\/b><span style=\"font-weight: 400;\">, where the interest rate is predetermined, the interest rate in a VRRR auction is discovered through the bidding process.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Liquidity Management:<\/b><span style=\"font-weight: 400;\"> By absorbing excess funds through VRRR auctions, the RBI helps keep <\/span><b>short-term interest rates aligned with its monetary policy stance<\/b><span style=\"font-weight: 400;\"> and prevents surplus liquidity from pushing market rates too far below the policy rate.<\/span><\/li>\n<\/ul>\n<p><b>Also Read : <\/b><a href=\"https:\/\/vajiramandravi.com\/current-affairs\/foreign-exchange-reserves-of-india\/\" target=\"_blank\"><b>Foreign Exchange Reserve of India<\/b><\/a><\/p>\n<h2><b>Why Did RBI Conduct the \u20b96 Lakh Crore VRRR Auction?<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Surplus Liquidity:<\/b><span style=\"font-weight: 400;\"> The main reason was the sharp increase in <\/span><b>surplus liquidity<\/b><span style=\"font-weight: 400;\"> in the banking system. Excess funds had risen substantially in recent weeks, creating pressure on short-term interest rates.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>FCNR(B) Inflows:<\/b><span style=\"font-weight: 400;\"> A major source of the additional liquidity was the large inflow of foreign currency through the special <\/span><b>FCNR(B) deposit scheme<\/b><span style=\"font-weight: 400;\">. The RBI&#8217;s special forex measures mobilised <\/span><b>$136.38 billion<\/b><span style=\"font-weight: 400;\"> by August 31, including <\/span><b>$127.23 billion through FCNR(B) deposits<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Rupee Liquidity:<\/b><span style=\"font-weight: 400;\"> The foreign currency mobilisation, followed by swaps with the RBI, resulted in additional <\/span><b>rupee liquidity<\/b><span style=\"font-weight: 400;\"> entering the banking system. Month-end government spending, including salary and pension payments, also added to liquidity.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Pressure on Overnight Rates:<\/b><span style=\"font-weight: 400;\"> The large liquidity surplus pushed short-term money market rates below the RBI&#8217;s policy rate. The <\/span><b>Weighted Average Call Rate (WACR)<\/b><span style=\"font-weight: 400;\">, the operating target of monetary policy, was around <\/span><b>4.93-4.94%<\/b><span style=\"font-weight: 400;\">, compared with the <\/span><b>5.25% repo rate<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<\/ul>\n<h2><b>VRR and VRRR Key Differences<\/b><\/h2>\n<p><a href=\"https:\/\/vajiramandravi.com\/current-affairs\/variable-rate-repo\/\" target=\"_blank\"><b>Variable Rate Repo<\/b><\/a><b> (VRR)<\/b><span style=\"font-weight: 400;\"> and <\/span><b>Variable Rate Reverse Repo (VRRR)<\/b><span style=\"font-weight: 400;\"> are auction-based tools used by the <\/span><b>Reserve Bank of India (RBI)<\/b><span style=\"font-weight: 400;\"> to manage short-term liquidity in the banking system.\u00a0<\/span><\/p>\n<table>\n<tbody>\n<tr>\n<td class=\"tb-color\" style=\"text-align: center;\" colspan=\"3\"><b>VRR and VRRR Key Differences<\/b><\/td>\n<\/tr>\n<tr>\n<td>\n<p><b>Feature<\/b><\/p>\n<\/td>\n<td>\n<p><b>VRR (Variable Rate Repo)<\/b><\/p>\n<\/td>\n<td>\n<p><b>VRRR (Variable Rate Reverse Repo)<\/b><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p><b>Purpose<\/b><\/p>\n<\/td>\n<td>\n<p><b>Injects liquidity<\/b> into the banking system when there is a shortage of funds.<\/p>\n<\/td>\n<td>\n<p><b>Absorbs excess liquidity<\/b> from the banking system when there is a surplus.<\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p><b>How it works<\/b><\/p>\n<\/td>\n<td>\n<p><b>Banks borrow funds<\/b> from the RBI for a short period by providing government securities as collateral.<\/p>\n<\/td>\n<td>\n<p><b>Banks park surplus funds<\/b> with the RBI for a specified period, with securities provided by the RBI as collateral.<\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p><b>Liquidity impact<\/b><\/p>\n<\/td>\n<td>\n<p><b>Increases<\/b> liquidity available with banks.<\/p>\n<\/td>\n<td>\n<p><b>Reduces<\/b> surplus liquidity available with banks.<\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p><b>Interest rate<\/b><\/p>\n<\/td>\n<td>\n<p>Rate is decided through a <b>competitive auction<\/b>.<\/p>\n<\/td>\n<td>\n<p>Rate is decided through a <b>competitive auction<\/b>.<\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p><b>Main use<\/b><\/p>\n<\/td>\n<td>\n<p>Helps address <b>short-term cash shortages<\/b> in the banking system.<\/p>\n<\/td>\n<td>\n<p>Helps manage <b>excess liquidity<\/b> and keep short-term interest rates aligned with the monetary policy stance.<\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p><b>Tenure<\/b><\/p>\n<\/td>\n<td>\n<p>Generally used for <b>short-term periods<\/b>, such as 1-14 days.<\/p>\n<\/td>\n<td>\n<p>Tenure can vary depending on the <b>RBI\u2019s liquidity management requirements<\/b>.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h2><b>Significance of VRRR Auction for Banking System Liquidity<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Controls Excess Funds:<\/b><span style=\"font-weight: 400;\"> VRRR auctions help the RBI <\/span><b>mop up surplus liquidity<\/b><span style=\"font-weight: 400;\"> from banks without permanently removing money from the financial system.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Supports Monetary Policy Transmission:<\/b><span style=\"font-weight: 400;\"> Absorbing excess liquidity can help prevent short-term market rates from falling too far below the <\/span><b>policy repo rate<\/b><span style=\"font-weight: 400;\">, allowing the RBI&#8217;s monetary policy stance to transmit more effectively.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Maintains Market Stability:<\/b><span style=\"font-weight: 400;\"> Persistent excess liquidity can create distortions in money-market rates. VRRR operations provide the RBI with a flexible way to manage these fluctuations.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Need for Further Measures:<\/b><span style=\"font-weight: 400;\"> If surplus liquidity remains elevated, the RBI may need to use other instruments along with VRRR auctions, including <\/span><b>forex swaps and incremental Cash Reserve Ratio (I-CRR)<\/b><span style=\"font-weight: 400;\"> measures, to absorb liquidity more sustainably.<\/span><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>RBI \u20b96 Lakh Crore VRRR Auction: RBI absorbs \u20b96.02 lakh crore surplus liquidity through VRRR auctions as excess funds push money-market rates below the 5.25% repo rate.<\/p>\n","protected":false},"author":29,"featured_media":123824,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[786],"tags":[5104,5105],"class_list":["post-123768","post","type-post","status-publish","format-standard","has-post-thumbnail","category-general-studies","tag-economy","tag-economy-notes","no-featured-image-padding"],"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/123768","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/29"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=123768"}],"version-history":[{"count":4,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/123768\/revisions"}],"predecessor-version":[{"id":123827,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/123768\/revisions\/123827"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/123824"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=123768"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=123768"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=123768"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}