RBI will conduct its second overnight Variable Rate Repo auction under LAF on December 23 for ₹500 billion. The move aims to ease short-term liquidity pressures amid festive demand and tax outflows. Analysts see this as a stabilizing measure to support banks and maintain orderly financial conditions.
The Reserve Bank of India (RBI) has announced it will conduct its second overnight Variable Rate Repo (VRR) auction under the Liquidity Adjustment Facility (LAF) on December 23, 2025, for a notified amount of ₹500 billion. This move comes as part of the central bank’s ongoing efforts to manage short-term liquidity pressures in the banking system.
Auction Details
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The VRR auction will be conducted on an overnight basis, allowing banks to borrow funds against eligible collateral.
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The notified amount stands at ₹500 billion, reflecting RBI’s proactive stance in ensuring liquidity stability.
Liquidity Context
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Recent RBI data showed banks tapping the Marginal Standing Facility (MSF) for over ₹21 billion, signaling tight liquidity conditions.
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Seasonal factors such as tax outflows and festive demand have contributed to the short-term cash crunch.
Policy Significance
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The VRR under LAF is a key instrument for fine-tuning liquidity, complementing other measures like MSF and reverse repos.
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Analysts expect the auction to ease funding costs and stabilize overnight rates.
This second VRR auction underscores RBI’s commitment to maintaining orderly financial markets while balancing liquidity management with monetary policy objectives.
Sources: Reserve Bank of India, Economic Times, Business Standard