Q8 · UPSC current affairs · 6 October 2026 · News · RBI VRRR Auctions Liquidity Management

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Which of the following monetary policy instruments is primarily utilized by the Reserve Bank of India to absorb excess liquidity from the commercial banking system?

A Variable Rate Reverse Repo (VRRR)
B Variable Rate Repo (VRR)
C Export Credit Refinance facility
D Standing Deposit Facility expansion for credit creation

Correct answer: (a) Variable Rate Reverse Repo (VRRR)

Explanation

Option A is correct because Variable Rate Reverse Repo (VRRR) auctions are deployed by the RBI to absorb excess liquidity from commercial banks. Option B injects liquidity rather than absorbing it. Options C and D serve different developmental or credit-support roles.

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