The Reserve Bank of India (RBI) conducted a 29-day VRRR auction on October 8, 2026. The central bank notified an amount of ₹2,00,000 crore for this Variable Rate Reverse Repo operation. However, banks offered significantly less than the notified amount.
Key Details of the VRRR Auction
Banks submitted total offers worth ₹79,655 crore against the notified ₹2,00,000 crore. As a result, the RBI accepted the entire ₹79,655 crore offered. The cut-off rate and weighted average rate both settled at 5.49%. Additionally, there was no partial acceptance at the cut-off rate, making the process straightforward.
The 29-day tenor means banks will park these funds with the RBI until early November 2026. Therefore, this auction helps the central bank absorb surplus liquidity from the banking system. Such operations are a key tool in RBI’s liquidity management framework.
What This Means for the Banking System
The low subscription — just about 40% of the notified amount — signals that banks held back significant funds. Meanwhile, this suggests that liquidity conditions in the system may not be as flush as the RBI anticipated. However, the full acceptance of received bids shows the RBI remains willing to absorb available surplus funds.
For example, when banks choose not to park excess cash with the RBI, they may deploy it in short-term lending or government securities instead. This behaviour can influence short-term interest rates in the money market. Additionally, it provides signals about prevailing liquidity sentiment among Indian banks.
The weighted average rate of 5.49% remains aligned with the current monetary policy corridor. As a result, the VRRR auction outcome reflects stable short-term rate conditions. Analysts and treasury desks will watch future auctions closely for any shifts in liquidity preference.
About Variable Rate Reverse Repo Auctions
The RBI uses VRRR auctions to temporarily absorb excess liquidity from banks. Unlike fixed-rate instruments, the VRRR rate is market-determined through competitive bidding. Therefore, these auctions offer a transparent view of where banks price short-term funds. The RBI regularly conducts these operations to maintain orderly money market conditions.
Source: RBI Press Releases
