RBI Injects Liquidity via VRR Auction

Mumbai, May 22 (PTI) The Reserve Bank of India (RBI) on Friday injected Rs 81,590 crore transient liquidity into the banking system through a three-day variable rate repo (VRR) auction.

Transient liquidity is temporary cash flow fluctuations in a financial or banking system, while a Variable Rate Repo (VRR) auction is a monetary tool used by the RBI to inject short-term liquidity into the banking system.

In a release the RBI said the funds were infused at a 5.26 per cent cut-off rate.

The demand for funds still remained lower than the notified amount of Rs 1 lakh crore despite the sharp drop in liquidity surplus in the banking system.


However, in comparison with the previous auction conducted on May 21, the demand is higher from banks in Friday's auction.

Currently, the liquidity in the banking system is estimated to be in surplus of around Rs 58,876.29 crore as on May 21, as compared to Rs 1.51 lakh crore as on May 20.

The tightness in the liquidity surplus has led to a sharp uptick in the overnight call money rates.

Money market experts anticipate that the RBI would announce another VRR auction to manage evolving liquidity conditions.