RBI Set to Conduct 2-Day Variable Rate Reverse Repo Auction Worth ₹500 Billion on December 2

In a proactive liquidity management step, the RBI will conduct a two-day variable rate reverse repo (VRRR) auction on December 2, 2025, for ₹500 billion. Reverse repo auctions are key tools used by the central bank to absorb excess liquidity from the banking system by offering banks an opportunity to park their surplus funds securely and earn an interest rate determined through a variable rate bidding process.

The VRRR operation helps in managing short-term liquidity, ensuring that overnight call money rates and other money market rates remain aligned with the RBI’s policy rate corridor. This measure supports monetary policy transmission and prevents excess liquidity from fueling inflationary pressures.

This auction follows previous VRRR actions by the RBI, which have been effective in addressing liquidity fluctuations caused by government spending cycles, tax outflows, and GST payments. The response to past auctions has been robust, reflecting banks’ demand for a safe avenue to manage surplus funds.

Key Highlights:

RBI announces a 2-day variable rate reverse repo auction on Dec 2, 2025.

The notified amount stands at ₹500 billion.

Objective: Absorb surplus liquidity and stabilize short-term rates.

Helps maintain money market rates within the RBI policy corridor.

Supports monetary policy transmission and inflation control.

Builds on RBI’s ongoing liquidity management strategy in 2025.

Past auctions saw strong bank participation and effective liquidity absorption.

Source: Reserve Bank of India, Reuters, Angel One, Economic Times