RBI Discontinues Daily VRR Auctions Amid ₹3 Lakh Crore Liquidity Surplus

The Reserve Bank of India (RBI) has discontinued daily Variable Rate Repo (VRR) auctions with immediate effect, citing a significant liquidity surplus in the banking system, currently estimated at around ₹2.75 to ₹3 lakh crore.

The daily VRR auctions, which were introduced on January 16, 2025, were initially aimed at easing short-term liquidity stress caused by tax outflows and foreign exchange interventions. However, with the improvement in liquidity conditions, the recent auctions have witnessed very low participation. For instance, on June 9, banks borrowed only ₹3,711 crore, and on June 10, just ₹3,853 crore, against a notified amount of ₹25,000 crore on both days.

The move to discontinue these auctions follows closely after the RBI’s recent decision to reduce the Cash Reserve Ratio (CRR) by 100 basis points, a policy measure that is expected to inject approximately ₹2.5 lakh crore into the banking system in a phased manner.

Although the daily VRR operations are being phased out, the RBI confirmed that it will continue to actively manage liquidity using other instruments such as the 14-day VRR auctions, Open Market Operations (OMOs), and the Standing Deposit Facility (SDF). These tools will help ensure adequate liquidity in line with evolving market conditions.

This decision reflects the RBI’s flexible approach to liquidity management, balancing the need to support economic activity while maintaining financial stability.