RBI Announces Reverse Repo Auction to Manage Overnight Rates, June 2025

RBI Announces Reverse Repo Auction

The Reserve Bank of India (RBI) has announced a seven-day variable rate reverse repo (VRRR) auction scheduled for June 27. The auction is valued at one trillion rupees ($11.62 billion).

Reasoning Behind the Move

This decision follows a thorough review of the liquidity conditions prevalent in the Indian banking system. The RBI's action is a direct response to the surplus liquidity currently observed.

Notably, the RBI has also decided to cancel the 14-day main operation previously scheduled for the upcoming fortnight, based on evolving liquidity dynamics.

Current Liquidity Status

According to data released by the RBI, the banking system's liquidity surplus was at 2.44 trillion rupees as of June 23.

Impact and Expert Opinion

Gaura Sen Gupta, an India economist at IDFC FIRST Bank, believes that this move signals the RBI's intention to bring the operative rate closer to the repo rate. This adjustment could potentially lead to an increase in short-term yields.

Earlier in June, the central bank announced a surprise 100-basis-point reduction in the cash reserve ratio.