The Reserve Bank of India will conduct overnight variable rate reverse repo (VRRR) auction on July 31 to absorb Rs 50000 crore. This comes close on the heels of mopping up Rs 46058 crore from the inter-bank market on July 29 through a three-day VRRR.
The central bank announced the VRRR even as the overnight weighted average call rate settled at 5.38% Wednesday, against the previous day’s 5.35%. The overnight rate is hovering below the repo rate of 5.50%.
The central bank conducts VRRR to manage liquidity when there’s an excess of supply of money in the inter-bank system. RBI has been taking calibrated actions to manage surplus liquidity and align the call money rate with the repo rate.
On Tuesday, the RBI absorbed a total of Rs 1.53 lakh crore through its various liquidity adjustment tools, including the VRRR.
