Muted response to VRR as liquidity woes ease

THE 14-DAY VARIABLE rate repo (VRR) auction on Friday received bids worth ₹8,375 crore, against the notified amount of ₹50,000 crore at a cut-off rate of 6.26%, indicating initial signs of ease in liquidity conditions.

- ANUPREKSHA JAIN

Market participants said with continuous infusion of funds, the durable systemic liquidity has considerably eased. So, banks seem reluctant to participate in long-term VRRs as they have enough funds to cover the upcoming outflows from the system.

"System liquidity has eased. On a daily basis, rates have come down to a low of 5.85-5.90%. Instead of borrowing funds at 6.26% in VRR auction, it is better to borrow under the standing deposit facility," said a call trader with a private bank.