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The Reserve Bank of India announced a number of liquidity-related changes on Wednesday as it revealed the MPC’s decision to maintain the status quo on policy rates as well as policy stance. Among major tweaks to its liquidity management framework was its decision to do away with the 14-day variable rate reverse repo (VRRR), with the RBI planning to focus on the variable rate repo (VRR) and the seven-day VRRR as its primary tools to conduct liquidity-related operations in the system. The move comes amid improving liquidity conditions in the country. 

The development confirms a Zee Business report in late July suggesting that the RBI could announce such decisions. 

The changes are part of recommendations by an internal central bank working group that studied the existing liquidity management framework that has been in place since February 2020. The suggestions were uploaded on the RBI portal after the policy announcements.

Here is a summary of some of the key changes mentioned in the RBI’s new liquidity management framework, as suggested by the working group: 

The RBI has invited feedback on the recommendations from all stakeholders till August 29. It will decide on the new framework accordingly. 

Status quo on repo rate and policy stance

The recommendations followed the RBI’s move to leave the repo rate as well as the policy stance unchanged. Currently, the repo rate -- or the key interest rate at which the RBI lends money to commercial banks -- stands at 5.5 per cent and stance at ‘neutral’. 

Here’s a summary of key points from the RBI’s latest monetary policy statement: 

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