RBI to conduct 7-day VRRR auction for absorbing excess liquidity; Bank and NBFC shares trade mixed

Nifty Bank in Wednesday's session traded with mild gains of 0.24 per cent even as the broader markets were up notably. The action in the banking and NBFC stocks is seen as the country's apex lender has decided to carry out a 7-day Variable Rate Reverse Repo (VRRR) auction of Rs 1 lakh crore on June 27.

On a review of the current and evolving liquidity conditions, it has been decided to conduct a Variable Rate Reverse Repo (VRRR) auction on Friday, June 27, 2025,” said the RBI in a release.

The move is aimed at absorbing excess liquidity from the banking system.

Add Zee Business as a Preferred Source

As of the last count, 8 of the 12 Nifty Bank constituents traded in the green, while four traded with a cut of up to 1 per cent.

Leading the gains were stocks like HDFC Bank, Bank of Baroda, PNB and Federal Bank among others, while laggards were Kotak Mahindra Bank and Axis Bank.

Meanwhile, NBFC stocks traded mixed with stocks like CreditAccess Grameen up over 4 per cent, followed by Edelweiss Financial Services trading higher by over 3 per cent and Paisalo Digital.

Why RBI will undertake VRRR auction?

The decision by the RBI to suck excess liquidity comes as the system's surplus liquidity reached Rs 2.43 lakh crore as on June 23, 2025. Additionally amid government expenditure, the surplus liquidity in the banking system is estimated to touch Rs 4.5 lakh crore by the month end.

So, to maintain the banking system's surplus liquidity at around 1 per cent of deposits, the decision concerning VRRR auction has been taken.

What is VRRR auction?

The Variable Reverse Repo Rate (VRRR) is an important monetary policy instrument which the Reserve Bank of India implements for effectively managing liquidity in the banking system, while simultaneously influencing short-term interest rates.