RBI to stop 28-day VRRR, will continue with 14-day auctions

The Reserve Bank of India will stop conducting 28-day variable rate reverse repo (VRRR) auctions, considering the current banking system liquidity conditions, but will continue with 14-day VRRR auctions, the central bank chief said on Friday.

"In view of the moderation in surplus liquidity, it has now been decided to merge 28-day VRRR with the 14-day VRRR. Consequently, from now, only 14-day VRRR auction will be conducted," RBI Governor Shaktikanta Das said, while detailing the RBI's monetary policy statement.

"Fine-tuning operations of various maturities will be conducted for injection as well as absorption of liquidity as may be necessary from time to time."

India's banking system liquidity slipped into deficit earlier this month and has largely remained that way since then. It currently stands at a deficit of 187 billion Indian rupees ($2.29 billion).

The liquidity is likely to remain in deficit in the second half of this financial year as credit growth picks up and the circulation of currency notes rises, analysts said.

The RBI has been conducting 28-day VRRR auctions for 500 billion rupees since November 2021, but these auction have not been fully subscribed for the last few months.

The RBI also conducts 14-day VRRR auctions for 2 trillion rupees and these too have failed to attract complete subscription in last few weeks.