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8 September 2026

RBI liquidity mop-up auctions

The topic pertains to RBI's monetary policy tools for liquidity management, which is a core component of the Indian economy syllabus under banking and resource management.

1 min read Day 2 of 2 2 questions 1 prelims

Notes

  • The Reserve Bank of India (RBI) conducted two liquidity mop-up auctions to manage excess funds in the banking system.
  • A 30-day Variable Rate Reverse Repo (VRRR) auction was held with a notified amount of ₹7 lakh crore, receiving bids of ₹2.59 lakh crore.
  • The 30-day VRRR auction saw a cut-off and weighted average rate of 5.24%.
  • An overnight VRRR auction was subsequently conducted with a notified amount of ₹5 lakh crore.
  • The overnight VRRR auction received bids of ₹3,53,390 crore, representing over 70% of the notified amount.
  • The overnight VRRR auction was accepted at a cut-off and weighted average rate of 5.24%.
  • Market response indicated a preference among lenders for parking funds for shorter tenures compared to longer-term instruments.

Part of a longer story

This is day 2 of 2 in RBI liquidity management operations, which has been running since 5 September 2026. Reading it whole is usually worth more than reading today alone — the exam asks how something developed.

Questions

  1. Explain the mechanism of Variable Rate Reverse Repo (VRRR) auctions and discuss why the Reserve Bank of India utilizes these tools for liquidity management in the banking system. 150 words
    Attempt this — 150 words in 8 min
    0 / 150 words 8:00
  2. Analyze the role of the Reserve Bank of India in managing surplus liquidity within the Indian economy. How do instruments like VRRR auctions reflect the central bank's stance on monetary policy and financial stability? 250 words
    Attempt this — 250 words in 11 min
    0 / 250 words 11:00

Prelims

  1. Which of the following best describes the primary objective of a Variable Rate Reverse Repo (VRRR) auction conducted by the RBI?

Syllabus

Topics

Sources

250words.in · https://250words.in/daily/2026-09-08/rbi-liquidity-mop-up-auctions