The Reserve Bank of India announced Friday it will conduct a variable-rate reverse repo auction on Monday, October 12, for a notified amount of Rs 2,00,000 crore with a 3-day tenor, the window running from 9:30 to 10:00 AM with reversal on Thursday, October 15. The VRRR, which pays banks to park surplus cash with the RBI, is the central bank’s main tool for absorbing system liquidity without permanent sales, and the Rs 2 lakh crore notified amount is a sizable drawdown for a three-day operation.
Tuesday brings the second leg: the Rs 25,000 crore open-market sale of government securities announced in the same Friday package and covered in yesterday’s edition. Wednesday adds a third leg, a regular Rs 23,000 crore auction of 91-day, 182-day and 364-day Treasury bills (Rs 8,000 crore, Rs 8,000 crore and Rs 7,000 crore respectively) settling Thursday, October 15.
The stack of operations completes a week of tightening that began with Wednesday’s 25 basis point repo-rate hike to 5.50% and Friday evening’s emergency rupee package, including the special dollar window for oil marketing companies and the 20% Foreign Exchange Risk Reserve on large rupee derivatives. The pattern is deliberate: the RBI is draining liquidity through rates, bond sales and now short-term reverse repos at the same time it is rationing dollar demand. Whether the VRRR is a one-off calibration around the OMO sale or the start of structurally tighter system liquidity to support the currency will be read from how quickly the central bank returns to the window after Thursday’s reversal.