The Reserve Bank of India (RBI) on Wednesday conducted two variable rate reverse repo (VRRR) auctions for a notified amount of Rs 1 trillion as it sought to impose a tight liquidity regime amid a pickup in government spending. The apex bank had conducted twin VRRR auctions — a route for banks to park funds with the RBI — on Tuesday as well.

Bond market circles said the auctions were driven by the need to keep the overnight money market rates closer to the repo rate even as the liquidity deficit in the banking system improved to a little over Rs one trillion from the record shortfall of Rs 3.46 trillion on January 24.

While the benchmark repo rate stands at 6.50 per cent, the weighted average call money rate, according to data from Clearing Corporation of India Limited, stood at 6.48 per cent after falling to 6.13 per cent on Friday.

Banks in the first VRRR auction on Wednesday parked Rs 96,093 crore with the RBI against the notified amount of Rs 50,000 crore — of this the RBI accepted Rs 50,019 crore at a cut-off rate of 6.49 per cent.

In the second auction, it received offers worth Rs 11,829 crore against a similar notified amount — all of which were accepted at a weighted average rate of 6.49 per cent.

On Monday, the RBI received Rs 27,538 crore against a notified amount of Rs 75,000 crore in the first auction, while in the second auction, it received offers for Rs 41,804 crore against the notified amount of Rs 50,000 crore.

On Monday, the central bank conducted a four-day VRRR auction of Rs 50,000 crore that saw banks parking Rs 18,750 crore of their excess funds. The development comes amid a three-day meeting of the monetary policy committee (MPC) which will conclude on Thursday.

The interest rate setting panel is widely expected to keep the policy repo rate unchanged at 6.5 per cent.