Mumbai: With the system level liquidity remaining tight, the Reserve Bank on Thursday said it will conduct a seven-day variable rate repo (VRR) auction for Rs 1 lakh crore under LAF (liquidity adjustment facility) on January 5.
On reviewing current and evolving liquidity conditions, it has been decided to conduct a variable rate repo auction on January 5, Friday for a notified amount of Rs 1 lakh crore. The auction will have a 7-day tenor that’s January 12, 2024, the monetary authority said in a statement.
The apex bank first introduced the idea of VRR in the monetary policy statement on December 8, 2021, as a means to infuse liquidity into the system. The first such auction was held for Rs 50,000 crore on January 20, 2022.
This comes when liquidity in the banking system is in a huge deficit of around Rs 1.19 lakh crore.
The liquidity deficit in the banking system reduced sharply between December 27 and January 3, 2024, due to month-end government expenditures such as payment of salaries and pensions.
Per the Reserve Bank of India’s (RBI) data, the liquidity deficit was reduced by over Rs 1.43 lakh crore, as it fell from Rs 2.62 lakh crore on December 27, to Rs 1.19 lakh crore on January 3.
