Context:

The Reserve Bank of India (RBI) uses VRR and VRRR to manage liquidity in the banking system.

VRR (Variable Rate Repo):

• Purpose: Injects short-term liquidity
• Mechanism: RBI conducts auctions; banks bid for funds
• Rate Determination: Market-driven, based on banks' willingness to borrow
• Duration: Typically up to 14 days

VRRR (Variable Rate Reverse Repo):

• Purpose: Allows banks to invest surplus funds
• Mechanism: RBI conducts auctions; banks bid to invest
• Rate Determination: Market-driven, based on banks' willingness to invest

Difference from Fixed Repo Rate:

• Fixed Repo Rate: Set rate at which banks borrow directly from the RBI
• VRR/VRRR: Rates determined by market auctions, providing more flexibility in liquidity management