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Source: The post is based on the article “RBI presses ahead with VRRR to suck out excess liquidity from banking system” published in The Hindu Businessline on 7th July 2023
What is the News?
The Reserve Bank of India (RBI) has said that it will conduct a three-day variable rate reverse repo (VRRR) auction for Rs 2 lakh crore.
What is Variable rate reverse repo(VRRR)?
The Reserve Bank of India(RBI) uses various ways to increase or decrease liquidity in the banking system.
Repo rate is the rate at which the central bank gives loans to commercial banks against government securities.
Reverse repo rate is the interest that RBI pays to banks for the funds.Variable rate reverse repo(VRRR) is a sub-type of reverse repo.
VRRR is usually undertaken to reduce surplus liquidity by withdrawing existing cash in the system.
RBI has been conducting VRRR everyday since June 30 to ensure that the overnight call money rate remains close to the target rate of 6.50 per cent.
