Skip to content
Free updates Login
BankingNABARD / RBI

Banks Ask RBI for Daily Overnight Liquidity Window

4 April 20251 min read
BANKING & FINANCEBanks Ask RBI forDaily OvernightLiquidity Window4 April 2025safalsetu.com

Why in the news

Lenders told RBI officials they want a daily overnight borrowing window as the core liquidity tool, for predictability and faster rate-cut transmission.

Key facts

  • Request: replace the 14-day Variable Rate Repo (VRR) with daily, on-tap borrowing.
  • Reason: 24×7 payment systems make fortnightly needs hard to forecast; daily auctions already run.
PeriodFramework
From Feb 202014-day VRR main tool; overnight to 13-day fine-tuning
January 2025Daily VRR auctions on working days

Impact

  • Liquidity moved from deficit to mild surplus in March.
  • Deposit rates fell 25-40 bps, which should lower MCLR.

Exam angle

  • MCLR: Marginal Cost of Fund-based Lending Rate.

Test yourself

1. Banks asked RBI to replace which 14-day instrument with a daily on-tap window as its main liquidity tool?

They wanted daily borrowing instead of the 14-day Variable Rate Repo.

2. When did RBI begin daily VRR auctions on working days?

Daily VRR auctions started in January 2025; the 14-day VRR dated from February 2020.

3. By how much did banks reduce deposit rates amid the liquidity surplus, per the meeting report?

Deposit rates fell by 25-40 basis points.

This topic is part of Daily Current Affairs 4 April 2025 (24 topics).

All topics of the dayDay quizApril 2025

Read more