RBI to conduct 7-day VRRR for Rs 2.5 lakh crore today
RBI
) will conduct a seven-day
variable rate reverse repo
(VRRR) operation for ₹2.5 lakh crore on Friday, a day when two previous such operations involving a total of nearly ₹2 lakh crore would be reversed and returned to the banking system. Friday is also the end of the fortnight, when banks need to report their
cash reserve ratio compliance
to the Reserve Bank of India (RBI).
Bank treasury officials said that the aim of this exercise is to keep
weighted average call rate
(WACR) and the TREPS rate within the
liquidity adjustment facility
(LAF) corridor.
by Taboola
by Taboola
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VRRR does not permanently remove liquidity, but increases cost of liquidity, thus pushing up overnight rates. The operations planned for Friday will be reversed on July 18, the next Friday.
"The primary intent of the VRRR exercise is to keep overnight rates well within the LAF corridor, thereby supporting effective transmission of the recent policy rate cuts. The move also aligns with the RBI's operational objective of maintaining
system liquidity surplus
around 1% of NDTL, which works out to around ₹2.5 lakh crore," said V RC Reddy, head of treasury,
Karur Vysya Bank
.
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