Why is it in the news?
RBI injected liquidity using VRR auction.
It is used for short-term liquidity management in the banking system.
Category: Economy
Important Points:
● VRR is a monetary policy tool used by RBI
● It injects short-term liquidity into banking system
● Interest rate is market-determined through auction
● Part of Liquidity Adjustment Facility (LAF)
● Banks bid competitively for funds
● Requires government securities as collateral
● Helps align WACR with repo rate
● More flexible than fixed repo rate
● Used during liquidity deficit situations