RBI repo undersubscribed but banks brace for volatile month-end liquidity

Central bank expected to conduct more variable rate repos towards end of financial year

The 14-day variable rate repo (VRR) auction held by the Reserve Bank of India on Friday was slightly undersubscribed, with banks borrowing funds worth Rs 82,650 crore out of the Rs 1-trillion window the central bank offered.

When the RBI conducts VRR operations, it infuses funds into the banking system. The cutoff at Friday’s auction was set at 6.51 per cent while the weighted average rate was 6.53 per cent.

The RBI has since February resumed repo operations after a five-month pause, as liquidity in the banking system is set to tighten due to year-end tax outflows and the redemption