The Reserve Bank of India conducted its second overnight Variable Rate Reverse Repo (VRRR) auction on September 29, 2026. The RBI VRRR auction drew bids worth ₹33,770 crore against a notified amount of ₹1,00,000 crore. Therefore, the auction saw a significantly lower response than the liquidity offered. The central bank accepted all offers received in full.
Key Details of the RBI VRRR Auction
The auction ran for a 1-day tenor, keeping it a short-term liquidity management tool. Banks submitted offers totalling ₹33,770 crore, and the RBI accepted the entire amount. Additionally, both the cut-off rate and the weighted average rate settled at 5.24%. No partial acceptance was required, as all bids cleared at the cut-off rate.
The low subscription rate is notable. Banks borrowed just about one-third of the available ₹1,00,000 crore window. However, this reflects current liquidity conditions in the banking system rather than a lack of interest in the instrument itself. Meanwhile, the uniform rate across bids signals stable short-term market sentiment.
What This Means for the Banking System
A VRRR auction allows the RBI to absorb surplus liquidity from banks on a short-term basis. As a result, it helps the central bank manage day-to-day money market conditions effectively. The 5.24% rate gives banks a secure, short-term parking option for excess funds. For example, banks with overnight surplus cash can deploy it safely through this window.
The fact that offers fell well short of the notified amount suggests that systemic liquidity may not be in heavy surplus right now. Additionally, it could indicate that banks prefer holding liquidity for other short-term obligations. Therefore, the RBI’s willingness to absorb up to ₹1,00,000 crore provides a strong liquidity backstop regardless of actual uptake. This flexibility is a key feature of the variable rate mechanism.
About the VRRR Mechanism
The RBI regularly uses VRRR auctions as part of its liquidity adjustment facility. These auctions complement other tools like fixed-rate reverse repos and open market operations. As a result, they give the central bank finer control over short-term interest rates. The September 29 auction is Press Release No. 2026-2027/1208, issued by Deputy General Manager (Communications) Ajit Prasad.
Source: RBI Press Releases
