Economy
RBI
increases 14-day VRRR amount in December to shift out of overnight auctions
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RBI’s rebalancing of liquidity management
started in february 2020, because the central bank shifted its liquidity
absorption tool out of the fixed-rate nightlong reverse repo window into VRRR
auctions of longer maturity.
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In order to absorb extra liquidity within
the system, the Reserve Bank of India declared conducting a VRRR program
because its higher yield prospects as compared to the fixed rate nightlong
reverse repo.
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The reserve bank of india (RBI) has
enhanced the quantity of variable rate reverse repo (VRRR) auctions in Dec,
because it is shifting out of the fixed-rate nightlong reverse repo auction and
re-establishing VRRR being as main liquidity management operations
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The amount below the 14-day VRRR auctions
on a fortnightly basis has been increased to Rs 6.5 lakh crore for Dec
seventeen and additional to Rs 7.5 lakh crore for Dec thirty first.
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While from Jan 2022 forwards, liquidity
absorption are undertaken in the main through the auction route.
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Market participants expect the heavy liquidity
withdrawal from the system can pull overnight balance rates near by repo rate,
this might mean that accrual returns on a really short-run, low market risk
product like nightlong and liquid funds may rise within the near months.
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