RBI Shelves 14-Day VRR Auctions On Improvement In Liquidity Conditions

As liquidity conditions in the banking system stabilise, the Reserve Bank of India has decided to do away with its main 14-day liquidity operations scheduled for Friday and the upcoming fortnight, a press release said.

Earlier this week, the central bank also discontinued its daily Variable Rate Repo auctions following an improvement in banking system liquidity.

As on June 11, liquidity in the banking system was Rs 2.57 lakh crore.

At the start of 2025, the RBI had been actively conducting daily and longer-tenor VRR auctions to inject short-term liquidity, responding to a period of tightness caused by tax outflows and heavy forex interventions.

These auctions allowed banks to borrow funds at market-determined rates, helping to stabilise overnight rates and ease funding pressures.

By April, the RBI began scaling back VRR operations as liquidity conditions improved. The daily VRR auction size was halved, and the central bank skipped its 14-day VRR auction for several consecutive fortnights, citing a review of 'evolving liquidity conditions'.

The move came during the June monetary policy meeting, where RBI Governor Sanjay Malhotra announced a 100 basis point cut in the cash reserve ratio, to be implemented in four tranches by the end of December 2025.

This is set to inject Rs 2.5 lakh crore of durable liquidity into the system.

With liquidity now in comfortable surplus, the RBI no longer needs to rely on frequent VRR auctions to inject funds.

The CRR cut has provided a more permanent solution, ensuring banks have ample resources for lending and monetary transmission.