The VRR mechanism allows banks to access short-term funds at market-determined rates, helping the central bank manage temporary liquidity mismatches and maintain stability in money markets. (Image Source: iStock) The Reserve Bank of India (RBI) infused Rs 48,014 crore into the banking system through a seven-day variable rate repo (VRR) auction on Tuesday, as surplus liquidity narrowed sharply due to advance tax outflows. The funds were injected at a cut-off and weighted average rate of 5.26%. However, the amount absorbed was significantly lower than the notified Rs 1.5 lakh crore, reflecting cautious demand even as liquidity conditions tightened following corporate tax payments. The VRR mechanism allows banks to access short-term funds at market-determined rates, helping the central bank manage temporary liquidity mismatches and maintain stability in money markets. Liquidity is expected to tighten further in the coming days with additional outflows linked to upcoming GST payments. Market participants are closely tracking the situation as seasonal tax-related pressures weigh on system liquidity. As of March 16, surplus liquidity stood at around Rs 75,484 crore, sharply down from Rs 2.08 lakh crore on March 15, underscoring the impact of advance tax outflows during the financial year-end period. Since January 2026, the RBI has infused around Rs 3.5 lakh crore of durable liquidity through open market operations (OMO), forming part of its broader strategy to stabilise funding conditions. Despite intermittent tightening, overnight money market rates have remained below the policy repo rate, indicating that overall liquidity conditions, while narrowing, remain relatively comfortable. Get Latest News Live on Times Now along with Breaking News and Top Headlines from Business, Economy and around the World. Working as Copy Editor at the Business Desk of Times Now Digital. Dedicated towards crafting interesting financial stories. Previously covered financi... View More