Panel suggests a new liquidity approach with shorter repos and retains the CRR -minimum on the current 90%. | Photocredit: Bloomberg
The internal working group of the Reserve Bank of India (RBI) that revised the Liquility Management Framework (LMF) has recommended to maintain the overnight-weighted average call rate (WACR) as the operational target and the increase in the 14-day variable speed repo and Vrrrituise reposty auctions.
“It is noted that WACR and rates in the nightly collateral segments (Triparty Repo and Market Repo) show a high degree of correlation among them and are in close coordination in the time horizon. Wacr is also proved when sending signals to other market tariffs to the further market tariffs … the over -range reasons for the oversign of the overflowing of the overflowing the overflowing the overflowing of the overflowing the overflowing the overflowing … The overflowing the overflowing reasons … The overview of the overflowing the overflowing … The overview of the overflowing reasons … The Overflowing Leaves … The Overflowing Leaves … The Overflowing Leaves … De Overtoeten … De Overtoeten … De Overtoeten … The The operational target ‘, the group that is stated in its report.
Liquidity shift
According to Venkatakrishnan Srinivasan, founder at Rockfort Fincap, while the market share of Wacr minuscule, which preserves it, ensures the control of the central bank. In the long term, however, a transition to a hybrid or wider money market rate, with access to selected non-bank-regulated entities, can be considered as the structures of the money market evolve with better participation of investment funds and other institutions.
Furthermore, the 14-day VRRRS auction under the existing LMF is the most important operation to manage the liquidity needs of time and short-term, supported by refinement activities from at night to 13-day tenors. However, analysis showed that although repo operations between Tenors were generally described too much, there was a general restraint at banks to renounce their surplus liquidity in the 14-day most important reverse repo operations, instead prefer the use of the SDF facility daily.
“That is why the group recommends that 14-day VRR/ VRR auctions can be stopped as the main surgery. Instead, the temporary liquidity can be mainly managed by 7-day Repo/ Reverse Repo operations and other activities from Tenors to 14 days to 14 days to the System LIKIGIDISTE.” The working group also suggested that the RBI retains the daily minimum requirementof 90 percent of the cash reserve ratio, against the request of banks for a reduction of 85 percent.
Jyoti Prakash Gadia, Managing Director at Resurgent India, says “The findings of the report, however, are, on expected lines that are recommended by the Commission to the functioning of the market mechanism and according to the existing operational guidelines, including those with regard to the Maintenance of the Maintenance of the Maintenance of the Operation of the Operation of the Operation of the Conservation of the Operation of the Conservation of the Conservation of the Operation on the Operation of the Operation on the Operation of the Operation on the Maintenance On Maintenance on the Operation of the Existing The Property.
Published on August 6, 2025
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