WACR as RBI’s Operating Target: Working Group View
Why in the news
An internal RBI group reviewed the operating framework in August 2025 amid global uncertainty.
Key facts
- WACR: overnight unsecured rate between banks; it carries credit and counterparty risk, so it reflects liquidity stance and passes on policy changes well.
- End the 14-day VRR/VRRR as main operation.
- Prefer 7-day or shorter tenors for day-to-day pressures.
Terms
| Term | Meaning |
|---|---|
| VRR/VRRR | Variable rate repo or reverse repo auctions, rate set by bids, adding or absorbing liquidity |
| Tenor | Term of an instrument |
| FX swap auction | RBI buys or sells foreign currency with a later reversal |
| OMO | Buying or selling government securities to manage money supply |
| Long-term VRR/VRRR | Durable adjustments, such as 1 or 3 months |
Exam angle
- Target: WACR.
- Dropped: 14-day VRR/VRRR.