The RBI has decided to conduct daily VRR operations to enhance banking liquidity amid the ongoing deficit. Banking & Finance | Dated: 18 Jan 2025 In January 2025, the Reserve Bank of India (RBI) decided to conduct Variable-Rate Repo (VRR) auctions daily until further notice. This move aims to improve banking liquidity amid a shortage. 🎯 Key Highlights: - The first such VRR auction was held on January 16, 2025, with a value of Rs 50,000 crore. Only standalone primary dealers were allowed to participate in the auction alongside other eligible bidders. - To manage the liquidity deficit, RBI reduced the Cash Reserve Ratio (CRR) of all banks to 4% of their deposits. This change will happen in two phases, each of 25 basis points (bps), starting from December 14, 2024, and December 28, 2024. - As of January 14, 2025, according to RBI data, the banking system had a liquidity deficit of Rs 2.09 lakh crore, and VRR auctions allow RBI to inject liquidity into the banking system during such deficits. 💡 Other Important Facts: (i) On January 15, 2025, RBI held a 5-day VRR auction with a notified amount of Rs 75,000 crore, receiving Rs 3,980 crore in bids, amid decreased banking liquidity due to RBI's increased forex market interventions, as India's Forex Reserve dropped to a 10-month low on January 3, 2025. (ii) VRR (Variable-Rate Repo) : This is a tool used by the RBI to inject short-term liquidity into the banking system. Through VRR, RBI allows banks to borrow money at a market-determined rate (usually lower than the Repo rate) for a maximum period of 14 days. (iii) CRR (Cash Reserve Ratio) : RBI requires all commercial banks in India to keep a certain percentage of their total deposits in cash with the RBI. 📚 Test Your Knowledge: Which institution has recently decided to conduct daily VRR operations to enhance banking liquidity? Correct Answer: RBI 🚀 Quick Recap: About RBI Governor : Sanjay Malhotra Headquarter : Mumbai