← 20 October 2026's Current Affairs · Economy GA Prelims ★★★★☆ Mains ★★★☆☆
RBI uses Variable Rate Repo auctions to manage liquidity
ஏன் செய்தியில்?
Banks bid ₹1.5 lakh crore for ₹1 lakh crore: how RBI's Variable Rate Repo works
RBI schedules an overnight VRR auction for 21 October as it manages near-term liquidity under the LAF.
Why it matters: factual, Prelims-type
What you need to know
2 நிமிடம்
The Reserve Bank of India will conduct an overnight Variable Rate Repo (VRR) auction under the Liquidity Adjustment Facility on 21 October 2026, after reviewing near-term liquidity conditions.
A 7-day VRR auction on 19 October drew bids of ₹1,50,735 crore against a notified amount of ₹1,00,000 crore, and ₹1,00,014 crore was allotted.
In such auctions the cut-off rate is discovered from the bids rather than fixed in advance.
ஆதாரங்கள்: Topper IAS editorial (PIB / The Hindu / Indian Express)
முக்கிய உண்மைகள்
Remember these
- RBI will hold an overnight Variable Rate Repo (VRR) auction under the LAF on 21 October 2026.
- The 7-day VRR auction on 19 October drew bids of ₹1,50,735 crore against a notified ₹1,00,000 crore.
- Of the bids, ₹1,00,014 crore was allotted.
- In a VRR auction the cut-off rate is discovered from bids, unlike a Fixed Rate Repo at the policy repo rate.
- LAF is RBI's main tool for managing day-to-day liquidity in the banking system.
ப்ரிலிம்ஸ் · மெயின்ஸ்
How the exam will ask it
ப்ரிலிம்ஸ்
- Under the Liquidity Adjustment Facility, the RBI injects liquidity through repo operations and absorbs it through reverse repo operations.
- In a Variable Rate Repo auction, the rate is determined through competitive bidding by banks rather than being fixed in advance.
- A Fixed Rate Repo is conducted at the policy repo rate, whereas a VRR can have a cut-off rate above or below it.
- The Cash Reserve Ratio is a reserve requirement and does not determine the rate in liquidity auctions.
மெயின்ஸ்
GS-III (Monetary policy; banking): Surplus or deficit system liquidity can blunt the transmission of the repo rate to market rates. RBI uses LAF instruments such as VRR auctions of varying tenors to fine-tune liquidity, with price discovery through bids. The way forward is transparent, predictable liquidity management so that short-term rates stay aligned with the policy stance.
Quick recall
Answer before you reveal
In a Variable Rate Repo (VRR) auction conducted by the Reserve Bank of India under its liquidity management framework, the rate at which banks obtain funds is:
- Determined through competitive bidding, with the cut-off rate emerging from the auction
- Fixed in advance at the policy repo rate for every bidder
- Set by the Ministry of Finance separately for each auction
- Linked automatically to the prevailing Cash Reserve Ratio
விடையைக் காட்டு
விடை: A — The correct answer is Determined through competitive bidding, with the cut-off rate emerging from the auction. In a variable rate repo the cut-off rate is discovered from the bids, unlike a fixed rate repo conducted at the policy repo rate.
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