Daily News Analysis

Variable Rate Repo (VRR)

stylish_lining

The Variable Rate Repo (VRR) is a monetary policy tool used by the Reserve Bank of India (RBI) to manage short-term liquidity in the banking system. Here's a detailed overview:

About VRR

Purpose:

  • Infuse Liquidity: The VRR mechanism is employed when the RBI wants to inject liquidity into the banking system, particularly when banks are hesitant to borrow at the fixed Repo Rate due to prevailing lower interest rates in the economy.

Mechanism:

  • Interest Rate: The interest rate for borrowing under the VRR is determined by the market and is generally lower than the standard Repo Rate, but not below the Reverse Repo Rate.
  • Duration: Borrowing through VRR typically spans more than one day and can extend up to 14 days. This flexibility allows banks to address liquidity needs over a slightly longer period compared to the overnight Repo Rate.

Function:

  • Short-term Liquidity: VRR serves as a tool for injecting short-term liquidity into the banking system. By offering a more market-driven interest rate, it encourages banks to avail themselves of the funds when they might otherwise be disinclined to do so.

Comparison with Variable Rate Reverse Repo (VRRR)

Purpose:

  • Absorb Excess Liquidity: In contrast to VRR, the Variable Rate Reverse Repo (VRRR) is used to absorb excess liquidity from the system. This is employed when there is a surplus of funds in the banking system that needs to be withdrawn to maintain balance and control inflation.

Mechanism:

  • Interest Rate: The VRRR is similarly conducted at a variable rate, which is determined based on the market conditions but is usually higher than the standard Reverse Repo Rate.

Function:

  • Liquidity Management: By offering a variable rate, VRRR helps manage the amount of liquidity in the system by encouraging banks to park excess funds with the RBI.

Summary

  • VRR is used to inject liquidity into the banking system for durations of more than one day, with rates determined by market conditions.
  • VRRR is used to absorb excess liquidity, with rates also determined by market conditions but typically higher than the Reverse Repo Rate.

These tools are essential for the RBI in managing short-term liquidity and ensuring stable monetary conditions in the economy.

Secondary Pollutants

A recent study has shed light on an important aspect of India's air pollution crisis: secondary pollutants, which now contribute to nearly one-third of PM2.5 pollution in the country. These pollut
Share It

Myogenesis

Group Captain Shubhanshu Shukla’s Myogenesis experiments on the ISS represent a major leap forward in India’s space research efforts, focusing on the formation and regulation of muscle fib
Share It

Central Sector Scheme of Scholarship for College and University Students (CSSS)

A scholarship scheme under the Pradhan Mantri Uchchatar Shiksha Protsahan (PM-USP) initiative by the Ministry of Education’s Department of Higher Education. It Provides financial assistance to m
Share It

Khasi People

The Meghalaya High Court has admitted a Public Interest Litigation (PIL) concerning the tribal certificate issuance for the Khasi community.This PIL challenges a government decision that has halted th
Share It

Similipal Tiger Reserve

Odisha High Court issued a notice to the Integrated Tribal Development Agency (ITDA) over a ban on Munda tribals from accessing Jayara, a sacred grove inside the tiger reserve.This raised concerns ove
Share It

Begonia nyishiorum

A fascinating new species of flowering plant, Begonia nyishiorum, has been discovered in the East Kameng district of Arunachal Pradesh, further highlighting the rich but underexplored biodiversity of
Share It

Asiatic Wild Dog

Asiatic Wild Dog A new study by the Wildlife Institute of India (WII) has confirmed the return of the dhole (Asiatic wild dog) to Kaziranga-Karbi Anglong Landscape (KKAL) in Assam, after being beli
Share It

Kolhapuri Chappals

Kolhapuri Chappals Kolhapuri Chappals are a traditional type of handcrafted leather footwear originating from Kolhapur, a city in the Indian state of Maharashtra History and Origin Or
Share It

THAAD Missile System

THAAD Missile System The United States utilized 15-20% of its THAAD missile inventory during a recent 12-day conflict involving Israeli and U.S. strikes on nuclear facilities.This deployment
Share It

India's First Butterfly Sanctuary: Aralam Butterfly Sanctuary

India's First Butterfly Sanctuary: Aralam Butterfly Sanctuary In a significant step towards biodiversity conservation, Kerala has established India’s first butterfly sanctuary, located in
Share It

Newsletter Subscription


ACQ IAS
ACQ IAS