With reference to the RBI's liquidity management tools, consider the following statements: 1. The RBI conducted a VRRR auction to drain ₹71,971 crore out of a notified ₹75,000 crore. 2. VRRR is a tool used by the RBI to inject liquidity into the banking system. 3. The RBI aims to maintain liquidity levels relative to 1% of the Net Demand and Time Liabilities (NDTL). Which of the statements given above is/are correct?

WACR tops repo rate for first time in nearly 2 months

GS3Economy · S&T · Environment · Security· Monetary policy, RBI & banking· Prelims· 23 September 2026

Monetary Policy and Liquidity Management: A GS3 case study on RBI's tools to control excess liquidity.

Why in news

The Wholesale Annual Call Rate (WACR) surpassed the repo rate for the first time in nearly two months as the RBI conducted OMO sales and VRRR auctions to drain excess liquidity.

Background

The RBI conducted a VRRR auction on Tuesday to drain ₹71,971 crore out of a notified ₹75,000 crore. The central bank plans a further ₹25,000 crore OMO on Monday and a ₹75,000 crore VRRR auction on Wednesday.

Facts for Prelims

BodyVRRR: Variable Rate Reverse Repo is a tool used by the RBI to drain liquidity from the banking system.
FactThe RBI aims to maintain liquidity levels relative to 1% of the Net Demand and Time Liabilities (NDTL).
FactThe RBI conducted a VRRR auction on Tuesday to drain ₹71,971 crore out of a notified ₹75,000 crore.
FactThe government is scheduled to sell ₹32,000 crore of 10-year bonds on Friday.

Prelims practice question

With reference to the RBI's liquidity management tools, consider the following statements:

The RBI conducted a VRRR auction to drain ₹71,971 crore out of a notified ₹75,000 crore.
VRRR is a tool used by the RBI to inject liquidity into the banking system.
The RBI aims to maintain liquidity levels relative to 1% of the Net Demand and Time Liabilities (NDTL).

Which of the statements given above is/are correct?

(a)2 only
(b)1 and 2 only
(c)1 and 3 only
(d)2 and 3 only

Show answer

Answer: (c) 1 and 3 only — Statements 1 and 3 are correct. Statement 2 is incorrect: VRRR is a tool used by the RBI to drain liquidity from the banking system.

For Mains

Q. Discuss the significance of the Wholesale Annual Call Rate (WACR) in monitoring the effectiveness of the RBI's liquidity management tools like VRRR and OMO.

Dimensions to cover in your answer

Monetary transmission: Impact of WACR fluctuations on short-term lending rates and commercial bank liquidity.
Liquidity management: Balancing systemic liquidity requirements against the need to control inflation via OMO and VRRR.

Keywords: Liquidity Management · Monetary Policy · Variable Rate Reverse Repo · Open Market Operations · WACR · NDTL

Read the full news →Source: Economic Times ↗

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This note is generated automatically from SatyaDheesh's news feed and mapped to the UPSC CSE syllabus. Check facts against the original report or PIB before using them in an answer.