RBI to Stop Daily VRR Auctions from June 11, 2025

The Reserve Bank of India (RBI) has announced that daily Variable Rate Repo (VRR) auctions will be discontinued from June 11, 2025. The decision follows a review of current and evolving liquidity conditions in the banking system.

Final Auction on June 10, 2025

The last daily VRR auction will take place on Tuesday, June 10, with a notified amount of ₹25,000 crore. These auctions have been held on all working days since their launch, between 10:00 am and 10:30 am, with reversals scheduled for the next working day.

Why the Facility Was Introduced

The RBI had introduced daily VRR auctions on January 16, 2025, as a short-term liquidity tool. The plan was to manage temporary mismatches in liquidity without causing disruptions. Under this mechanism, banks and standalone primary dealers could borrow funds by placing government securities as collateral. The interest rate was determined through auction, based on demand.

The auctions followed the Liquidity Adjustment Facility (LAF) framework. Key features included a minimum bid amount of ₹1 crore, interest-based bidding, and allotments at the cut-off rate on a pro-rata basis. The first auction had a notified amount of ₹50,000 crore.

Liquidity in the Banking System

As of June 8, 2025, the banking system had a surplus liquidity of around ₹2.45 trillion, according to RBI data. The central bank attributed recent tightening of liquidity to higher-than-expected GST inflows, which impacted overnight market rates and increased reliance on the fixed-rate reverse repo facility.

Previous Guidance on Surplus Levels

In April, RBI Governor Sanjay Malhotra had indicated that the central bank would aim to keep liquidity surplus near 1% of Net Demand and Time Liabilities (NDTL). This target helps guide liquidity operations without allowing excess funds to remain idle in the system.

Read more: RBI Infuses ₹24,000 Crore into Banking System via Bond Buyback!

Conclusion

With surplus liquidity currently available and short-term pressures easing, the RBI has decided to discontinue the temporary daily VRR auctions introduced earlier this year.

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