The RBI will conduct an overnight variable rate repo auction worth ₹750 billion on Dec 17, 2025 under the LAF framework. The move aims to ease year-end liquidity pressures, stabilize money market rates, and reinforce financial stability. Traders see it as a timely intervention to support banking operations.
Market Update
The Reserve Bank of India (RBI) has announced it will conduct an overnight variable rate repo auction worth ₹750 billion under the Liquidity Adjustment Facility (LAF) on December 17, 2025. This move is aimed at managing short-term liquidity in the banking system and ensuring smooth financial market operations.
Key Highlights
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Auction Size: The RBI will infuse up to ₹750 billion through the overnight repo auction.
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Liquidity Management: The step comes amid rising year-end liquidity pressures, with banks seeking short-term funds to meet obligations.
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Variable Rate Mechanism: The auction will be conducted on a variable rate basis, allowing market participants to bid competitively for funds.
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Impact on Markets: Traders expect the move to stabilize money market rates and ease funding costs for banks.
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Strategic Context: Such auctions are part of RBI’s routine liquidity management toolkit, balancing inflation control with growth support.
Why It Matters
By conducting this auction, the RBI signals its proactive stance in maintaining financial stability. The infusion is expected to provide relief to banks and support overall market confidence during a period of tight liquidity.
Sources: Reuters Market Desk, Economic Times Money & Banking, Business Standard Finance Updates