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Fix the driver behind crashes, sound loss and screen glitchesFind Drivers →Repair Windows errors before they cause bigger problemsFix Now →A variable-rate repo (VRR) auction injects liquidity: eligible institutions borrow funds from the Reserve Bank of India (RBI) against eligible securities. A variable-rate reverse repo (VRRR) auction does the opposite: participants place funds with the RBI, absorbing liquidity from the banking system. The cash-flow direction determines whether participants bid to borrow or offer funds to the RBI.
VRR vs. VRRR at a glance
| Feature | Variable-rate repo (VRR) | Variable-rate reverse repo (VRRR) |
|---|---|---|
| Cash-flow direction | The RBI lends cash to participants, adding liquidity to the banking system. | Participants place cash with the RBI, absorbing liquidity from the system. |
| Typical use | To address a liquidity shortage or short-term funding mismatch. | To absorb surplus liquidity. |
| Participant action | Bid the rate at which they want to borrow from the RBI. | Offer funds to the RBI at a rate. |
| Collateral and submission | Eligible securities secure the operation; bids are submitted electronically through e-Kuber. | Eligible securities secure the operation; offers are submitted electronically through e-Kuber. |
| Amount and tenor | Set by the RBI for each operation based on its liquidity assessment. | Set by the RBI for each operation based on its liquidity assessment. |
The RBI says VRRR auction mechanics are the opposite of repo auction mechanics. That difference is more than terminology: it changes the direction of funds and how rates are ranked. RBI liquidity-management publication.
How the rate rules work
VRR: participants bid to borrow
In a VRR auction, participants quote the rate at which they seek RBI funds. The RBI ranks bids from highest to lowest to fill the notified auction amount. The cutoff is the rate at which the amount is reached. Successful bids are at or above the cutoff; if bids tie at the cutoff, the RBI may allot funds pro rata. The RBI says bids at or below the prevailing repo rate are not accepted.
VRRR: participants offer funds
In a VRRR auction, participants offer funds to the RBI. Because the operation reverses the repo auction’s direction, its rate rule is framed as an offer rather than a borrowing bid: the RBI says offers at or above the prevailing repo rate are not accepted. Do not read the two rules as though participants submit the same kind of rate in both auctions.
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Why the RBI uses both operations
Repo operations provide liquidity, while reverse repo operations absorb it. The RBI uses variable-rate operations as part of liquidity management, adjusting the operation to conditions rather than relying on a single permanent amount or tenor.
The RBI’s 2021–22 Annual Report describes 14-day VRR and VRRR operations as the main liquidity-management tools under the framework announced in February 2022, with fine-tuning and longer-maturity operations used when needed. It also records that increased absorption through VRRR auctions at higher cutoffs coincided with higher effective reverse repo rates and upward movement in money-market rates during that period. This is a historical account of that episode, not a promise that a VRRR auction will produce the same market effect in other conditions. RBI Annual Report 2021–22.
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Operation details depend on the RBI notice
The RBI sets the amount and tenor for each operation. The specific notice also gives the bidding window and reversal date, so these details should be checked for the dated auction rather than treated as a standing schedule.
- A January 15, 2025 notice announced VRR auctions on working days in Mumbai and specified a bidding window and reversal schedule.
- A June 24, 2025 notice announced a seven-day VRRR auction with its amount and reversal date.
- An August 6, 2025 notice announced an overnight VRRR auction with a different amount and timing.
These notices are examples of operation-specific terms, not evidence of a current schedule. For current amounts, rates, tenor, timing, or results, consult the latest RBI notice and use its date. RBI press releases.
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Do not confuse VRRR with the fixed-rate reverse repo facility
A variable-rate reverse repo auction is distinct from the RBI’s fixed-rate reverse repo facility. The former is an auction in which participants offer funds at variable rates; the latter is a separate fixed-rate facility. The RBI’s explanation of auction mechanics is specific to these operations. RBI liquidity-management publication.
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