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The 14-day variable rate reverse repo (VRRR) auction will be held by the Indian central bank on Friday from 10.30 to 11 a.m. The Central Bank of India (RBI) announced that the VRRR auction is held for a specified sum of 50,000 crore.
The auction will be reversed starting at "opening of the day" on March 10.
Why is the VRRR auction held? What is it?
The repo rate is the price at which, in times of cash scarcity, commercial banks are given loans by the central bank. It is used to control inflation. Banks lend money to the RBI at a fixed or variable interest rate known as a reverse repo. A subset of reverse repo is VRRR. VRRR is typically used to minimise excess liquidity by taking out already present cash from the system.
The average daily absorption under the Liquidity Adjustment Facility (LAF) increased to Rs 1.6 lakh crore in the December-January period from an average of Rs 1.4 lakh crore in October, according to RBI Governor Shaktikanta Das, who stated this on Wednesday. November was.
LAF permits banks to lend money to RBI through reverse repo while also borrowing money through repo agreements.
Operating Instructions:
1) The auction will be held on the CBS (e-Kuber) platform, and the minimum bid is multiples of one crore, according to a Livemint article.
2) Up to two decimal places, banks may quote multiple bids in percentage form. All offers above the repo rate, however, will be ignored.
3) After the auction time is completed, all the bids will be grouped in ascending order and a cut-off rate will be determined in proportion to the announced amount.
4) In the event that more than one successful bid at the cut-off rate is received, there will be the option of pro-rata allocation.
5) The Reserve Bank of India retains the right, however, to I absorb less than the notified amount without providing a justification and (ii) absorb less than the notified amount due to rounding effects.
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