Variable Rate Repo
About
- The Variable Rate Repo (VRR) mechanism allows banks to borrow short-term funds from the Reserve Bank of India (RBI) against government securities as collateral.
- It is a short-term liquidity adjustment tool employed by the RBI to supply funds to the banking system.
- Unlike the Fixed Rate Repo, where the interest rate is predetermined by the RBI, VRR uses competitive bidding to determine rates.
Why in News?
- The Reserve Bank of India has announced that it will conduct a 90-day variable rate repo (VRR) operation for an amount of ₹25,000 crore, allowing banks to borrow funds at market-determined rates against collateral.