A variable-rate repo (VRR) auction injects liquidity: eligible institutions bid to borrow funds from the Reserve Bank of India (RBI) against eligible securities. A variable-rate reverse repo (VRRR) auction absorbs liquidity: participants place funds with the RBI against securities. The cash moves in opposite directions, and the RBI says VRRR auction mechanics are the reverse of VRR mechanics.
What is the difference between VRR and VRRR?
| Feature | Variable-rate repo (VRR) | Variable-rate reverse repo (VRRR) |
|---|---|---|
| Cash-flow direction | The RBI lends cash to participants, adding liquidity to the banking system. | Participants place cash with the RBI, absorbing liquidity from the system. |
| Participant’s action | Bids the rate at which it wants to borrow from the RBI. | Offers funds to the RBI at a rate. |
| Usual liquidity purpose | Meet a liquidity shortage or temporary funding mismatch. | Absorb surplus liquidity. |
| Rate-cutoff rule | Bids are ranked from highest to lowest. Accepted bids are at or above the cutoff; bids at the cutoff may be allotted pro rata. Bids at or below the prevailing repo rate are not accepted. | The RBI describes the mechanics as opposite to repo auctions; offers at or above the prevailing repo rate are not accepted. |
| Collateral and submission | Eligible securities serve as collateral; bids are submitted electronically through e-Kuber. | Eligible securities serve as collateral; offers are submitted electronically through e-Kuber. |
| Amount and tenor | Set by the RBI for each operation in light of its liquidity assessment. | Set by the RBI for each operation in light of its liquidity assessment. |
The RBI explains the auction mechanics and processes in its liquidity-management publication.
How do the auction rates and cutoffs work?
VRR: bids to borrow
In a VRR auction, a participant’s quoted rate is the rate at which it is willing to borrow from the RBI. The RBI ranks bids from higher to lower rates to allocate the announced amount. The cutoff is reached when the allotted amount is filled. If bids tie at the cutoff, the RBI may allocate the remaining amount pro rata. Bids at or below the prevailing repo rate are excluded.
VRRR: offers to place funds
In a VRRR auction, participants offer funds to the RBI rather than bid to borrow. Because the cash-flow direction and participant action are reversed, the cutoff rule is not simply the same bid rule with a different label: the RBI says it does not accept offers at or above the prevailing repo rate. The RBI’s published description states that “the mechanics of a variable-rate reverse-repo auction is opposite of the mechanics for repo auctions.”
Free tools Windows power users keep installed
One-click scans. No signup required.
#1 Best Overall
Why does the RBI hold these auctions?
The RBI uses variable-rate repo and reverse repo operations to manage liquidity as conditions change. Repo operations supply liquidity; reverse repo operations absorb it. In its Annual Report for 2021–22, the RBI described 14-day VRR and VRRR operations as the main liquidity-management tools under a framework announced in February 2022, with fine-tuning and longer-maturity operations available when needed. The report also noted that greater absorption through VRRR auctions at higher cutoffs coincided with higher effective reverse repo rates and upward movement in money-market rates during that period. That is a description of the 2021–22 episode, not a promise that a VRRR auction will produce the same market-rate effect in other conditions. RBI Annual Report 2021–22.
What details change from one auction to another?
The amount, tenor, bidding window and reversal date are specified in the RBI notice for each operation, rather than being permanent settings. For example, RBI notices announced VRR auctions on working days in Mumbai on January 15, 2025; a seven-day VRRR auction on June 24, 2025; and an overnight VRRR auction on August 6, 2025. Those notices are dated examples, not standing schedules. Check the latest RBI notice for the terms of a particular auction before relying on its amount, timing, tenor or reversal date. RBI auction notices.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Is a VRRR auction the same as the fixed-rate reverse repo facility?
No. A variable-rate reverse repo auction is a specific auction mechanism in which participants offer funds at variable rates. It should not be conflated with the RBI’s fixed-rate reverse repo facility, which is a distinct mechanism. The RBI’s liquidity-management publication describes the auction mechanics.
Quick Recap
Product prices and availability are accurate as of the date/time indicated and are subject to change. Any price and availability information displayed on Amazon at the time of purchase will apply.
