RBI to conduct 29-day Variable Rate Reverse Repo (VRRR) auction under LAF
Distilled Policy Brief
- The Reserve Bank of India has announced a 29-day Variable Rate Reverse Repo (VRRR) auction under the Liquidity Adjustment Facility to manage evolving liquidity conditions.
- Participants are provided with an option for premature reversal of funds lent during the auction through the RBI's E-Kuber portal, subject to specific operational guidelines.
- Settlement of premature reversals occurs at the start of the next working day, crediting the participant's current account with principal and accrued interest while debiting the collateral securities from the SGL account.
🎯 Prelims High-Yield Examination Points
The VRRR auction uses the E-Kuber portal for operations and allows for premature reversal of bids subject to specific guidelines and prior notification windows.
⚖️ Mains Analytical & Syllabus Linkages
Variable Rate Reverse Repo auctions serve as a crucial liquidity management tool for the RBI to absorb surplus liquidity from the banking system, thereby anchoring short-term interest rates and supporting monetary policy transmission.
🎯 UPSC Prelims Practice Drill
With reference to the Variable Rate Reverse Repo (VRRR) auction conducted by the Reserve Bank of India (RBI), consider the following statements: 1. Participants in the VRRR auction are provided with an option for the premature reversal of funds lent. 2. The requests for premature reversal can be placed through the RBI's E-Kuber portal. 3. The settlement of the premature reversal takes place on the same day the request is placed. Which of the statements given above are correct?
- [A] 1 and 2 only
- [B] 2 and 3 only
- [C] 1 and 3 only
- [D] 1, 2 and 3
▶ Reveal Official Answer & Analytical Explanation
Statement 1 is correct as participants are provided with an option for premature reversal of funds lent during the VRRR auction. Statement 2 is also correct because requests for premature reversal can be placed through the RBI's E-Kuber portal during specified hours. Statement 3 is incorrect because the settlement of premature reversal takes place at the 'start of day' on the next working day following the date of placement of the request, not on the same day.
🏛️ Historical Twin PYQ Anchor (2021)
Consider the following statements regarding the "National Clean Air Programme (NCAP)": 1. It is implemented by the Ministry of Environment, Forest and Climate Change. 2. Central Pollution Control Board acts as the sole regulatory executive body.