RBI Launches ₹1 Lakh Cr VRRR Auction to Soak Up Surplus Liquidity—Signals Tactical Tightening

The Reserve Bank of India (RBI) will conduct a ₹1 lakh crore, 7-day Variable Rate Reverse Repo (VRRR) auction on July 4, 2025, to absorb excess liquidity from the banking system. The auction will be held between 10:00 AM and 11:00 AM, with the reversal scheduled for July 11.

 

This is the first VRRR auction since November 2024, and comes amid a liquidity surplus of ₹3.75 lakh crore as of July 2. The RBI aims to align short-term rates closer to the repo rate of 5.50%, as overnight call and TREPS rates have been drifting below the Standing Deposit Facility (SDF) rate of 5.25%2.

 

Analysts view the move as a calibrated liquidity tightening step, especially after a recent 50 bps rate cut. It may also temper expectations of further easing in the near term.

 

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Source: Moneycontrol – RBI VRRR Auction Announcement | BusinessWorld – Policy Implications