RBI Conducts 3-Day VRRR Auction; Accepts Rs 573.80 Billion Bids at Weighted Average Rate of 5.48%

In its latest liquidity management operation, the Reserve Bank of India (RBI) conducted a 3-day Variable Rate Reverse Repo (VRRR) auction, receiving bids worth Rs 573.80 billion against the notified Rs 1,000 billion. The RBI accepted the entire bid amount, indicating ongoing efforts to manage surplus liquidity within the banking system.

The weighted average rate at the auction was 5.48%, with a cut-off rate set marginally higher at 5.49%. These rates reflect RBI’s intent to maintain short-term interest rates close to its policy rates, ensuring stability in the overnight lending market.

The central bank also set underwriting commissions for government bonds at 0.0118 rupees per 100 rupees for 2065 bonds and 0.0070 rupees per 100 rupees for 2040 bonds. These commissions are critical for managing risks related to underwriting in government securities.

Market analysts view this VRRR auction as a tool to absorb excess funds temporarily, helping the RBI anchor short-term rates, especially given the ongoing surplus liquidity in the banking sector amid government spending cycles and foreign inflows.

Key Highlights:

RBI’s 3-day VRRR auction sees bids of Rs 573.80 billion vs notified Rs 1,000 billion.

Entire bid amount accepted at weighted average rate of 5.48%, cut-off at 5.49%.

Underwriting commissions fixed for 2040 and 2065 government bonds.

VRRR helps absorb surplus liquidity and stabilize overnight borrowing costs.

Auction reflects RBI’s proactive liquidity management amid fiscal expenditure and market conditions.

Sources: Reserve Bank of India, Informist Media, Business Standard, Economic Times