RBI Grade BNABARD ESISEBI
In one line
Context:
The Reserve Bank of India (RBI) has announced it will discontinue daily Variable Rate Repo (VRR) auctions from Wednesday, June 11, 2025, following a review of the improving liquidity conditions in the banking system.
Key Highlights:
Daily VRR Auctions Discontinued
“RBI MPC Unpacked: Key Theory Meets Today’s Macro Trends”Tap to play · from the C4S channel
- Daily VRRs, introduced on January 16, 2025, to manage short-term liquidity tightness, will now be discontinued.
- This step reflects muted demand for funds: banks bid only ₹3,711 crore on June 9 against a notified ₹25,000 crore.
Free PDF · print or read offline
Download this page as a PDF
A clean PDF of this page with the C4S header — it opens right away, and the link comes to your WhatsApp too.
Reason for the Move
- The banking system is now in a liquidity surplus of ₹2.45 trillion (as of June 8).
- Earlier, the system had faced a deficit of ₹2.22 trillion on January 15 due to tax outflows and forex market interventions.
- As conditions improved, RBI had already reduced the size and frequency of both daily and 14-day VRR auctions.
Shift in RBI’s Monetary Stance
- On Friday, June 6, RBI:
- Cut the policy repo rate by 50 basis points.
- Shifted its stance from accommodative to neutral.
- Announced a 100 basis point reduction in CRR in four tranches (starting September), lowering it to 3%.
Impact on Liquidity
- The CRR cut is expected to inject ₹2.5 trillion of primary liquidity by end-November 2025.
- Since January, RBI has infused a total of ₹9.5 trillion in durable liquidity, including:
- ₹5.2 trillion via Open Market Operations (OMO).
- ₹2.1 trillion through long-term VRRs.
- ₹2.2 trillion via USD/INR buy-sell swaps.
- As a result, daily demand for short-term VRR fell, and balances under Standing Deposit Facility (SDF) averaged ₹2 trillion during April–May.
TET
