RBI Overnight VRR Auction Sees Strong Demand, Sets Cut-Off Rate at 5.51%

On October 30, 2025, the RBI held an overnight VRR auction to manage short-term liquidity and align overnight rates with monetary policy objectives. The auction saw robust demand, with banks bidding around ₹1,207.02 billion, surpassing the notified ₹1,000 billion mark—a clear indicator of ongoing liquidity needs and bank engagement in short-term funding.

RBI made a partial allotment at 82.38% and allotted bids worth ₹1,000.12 billion at a competitive cut-off and weighted average rate of 5.51%. The elevated rates reflect the RBI’s intent to anchor overnight money market rates close to the policy repo rate and efficiently absorb surplus liquidity.

Market participants highlighted the auction’s strategic importance in smoothing transient liquidity fluctuations and preventing money market rates from rising above the repo level. The operation also aimed to counter temporary pressures from tax outflows and maturing reverse repo instruments.

Key Highlights:

RBI overnight VRR auction oversubscribed; bids worth ₹1,207.02 billion received.

Notified amount was ₹1,000 billion; actual allotment ₹1,000.12 billion.

Partial allotment at 82.38% of bids submitted.

Cut-off and weighted average rates set at 5.51%.

Auction helps anchor overnight rates near monetary policy target.

Reflects strong systemic liquidity demand amid short-term market adjustments.

Sources: Business Standard, Drishti IAS, RBI Press Releases