RBI reduces VRR auction size as liquidity tightness eases
Financial Express Mumbai|March 09, 2024
THE RESERVE BANK of India (RBI) has scaled down the size of its variable rate repo (VRR) auction over the past two months, indicating a gradual easing of liquidity tightness in the banking system.
SACHIN KUMAR

Ranging from ₹50,000 crore to ₹2.5 trillion in December and January during tight liquidity conditions, the size of repo auctions has decreased to ₹25,000 crore to ₹1.5 trillion in February and March.

Additionally, the RBI has begun conducting variable rate reverse repo (VRRR) auctions from February to absorb excess liquidity.

"Government spending, which has eased liquidity tightness. However, the respite from tight liquidity is momentary because advance tax and GSTrelated outflows in March-end will drain out liquidity from the system," Anil Gupta, senior vice president, ICRA, told FE has started "The size of VRR has reduced in the past one month because the demand for cash from banks has come down."

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