The Reserve Bank of India (RBI) on Wednesday conducted a two-day variable rate repo (VRR) auction which resulted in the infusion of close to ₹72,000 crore of liquidity into the banking system.

Against the notified amount of ₹75,000 crore, the auction received bids for ₹71,830 crore, all of which were accepted at a cut-off rate of 6.51 per cent. The RBI conducts VRR auction when the liquidity deficit in the banking system widens.

The liquidity deficit in the system was running at nearly ₹2,55,709 crore on May 21.

It has been attributed to GST outflows and a lull in government spending because of the ongoing general election.

This resulted in the central bank holding a VRR auction on May 21 that saw a much better response.

Against a notified amount of ₹1,25,000 crore, the RBI received bids worth ₹1,97,142 crore. The amount allotted stood at ₹1,25,002 crore at a cut-off rate of 6.70 per cent.

In April, RBI governor Shaktikanta Das had said that the central bank will remain nimble and flexible in its liquidity management by fine-tuning operations in both repo and reverse repo.

He had pointed out that the RBI will deploy an appropriate mix of instruments to modulate both frictional and durable liquidity to ensure money market interest rates evolve in an “orderly manner that preserves financial stability’’.

According to data from the Clearing Corporation of India Ltd (CCIL), the weighted average call rate (WACR) — the average interest rate at which banks borrow from each other — is now at 6.75 per cent. It moved between 5.40 per cent and 6.85 per cent during the day.

While the RBI usually looks to anchor WACR near the repo rate, it is now using the marginal standing facility (MSF) rate which stands at 6.75 per cent because of liquidity tightness. MSF is a window where banks can borrow emergency funds from the RBI.

Meanwhile, the Sensex advanced 267 points, while the Nifty closed higher for the fifth day in a row on Wednesday amid buying in bluechips Reliance and Infosys.