Overnight rates rise on VRRR auction

RBI receives bids worth ₹84,975 crore, against notified amount of ₹1 trillion

- ANJALI KUMARI

Overnight money market rates rose after the Reserve Bank of India's (RBI's) seven-day Variable Rate Reverse Repo (VRRR) auction on Friday.

The weighted average call rate (WACR), which is the operating target of the monetary policy, inched closer to the policy repo rate of 5.5 per cent as it settled at 5.38 per cent, against the previous close of 5.27 per cent. The weighted average overnight TREPS (Treasury Bills Repurchase) rate settled at 5.42 per cent, against 5.24 per cent on Thursday.

The VRRR auction was conducted to align the overnight rates closer to the repo rate. These rates were trading much below the policy repo rate due to significant surplus liquidity in the banking system.

The RBI received bids worth ₹84,975 crore at the VRRR auction, against the notified amount of ₹1 trillion. Money market participants said that the amount of bids was lower than expected.

"The bids were lower because of reporting Friday, which is today, and quarter-end. Also, it is a long-tenor VRRR, hence the bidding was lower," said a call dealer with a public sector bank (PSB).