RBI's Liquidity Lifeline: Unraveling the Mystery of Daily VRR Auctions

The Reserve Bank of India (RBI) has been conducting daily Variable Rate Repo (VRR) auctions to address the liquidity crunch in the banking system. These auctions are crucial for maintaining stable liquidity conditions, especially during periods of high outflows like quarterly tax payments. As of recent auctions, the RBI has been offering substantial amounts to infuse liquidity, though responses have varied based on the auction tenor and market conditions.

 

Key Highlights:

The RBI's efforts aim to keep overnight rates aligned with the repo rate and provide banks with assured liquidity, though experts suggest more durable solutions are needed to ensure long-term stability.

 

Source: Financial Express, Economic Times, Business World