The Reserve Bank of India (RBI) conducted a seven-day Variable Rate Repo (VRR) auction worth Rupees one trillion (Rs 1 lakh crore) on 18 May 2026 to manage evolving liquidity conditions in the banking system. The auction, announced on 15 May, was scheduled despite the banking system being in a net liquidity surplus of about Rs 2.17 trillion as of 16 May, reflecting the RBI's fine-tuning of short-term liquidity. Under a Variable Rate Repo operation, banks borrow funds from the RBI against government securities at market-determined rates rather than the fixed repo rate. Banks submit bids stating the amount they wish to borrow and the interest rate they are willing to pay; based on these bids the RBI determines a cut-off rate and injects liquidity accordingly. VRR auctions typically have maturities ranging from one to fourteen days and are a key instrument of the RBI's Liquidity Adjustment Facility (LAF) under its revised liquidity management framework. The LAF corridor comprises the repo rate at the policy mid-point, the Standing Deposit Facility (SDF) as the floor and the Marginal Standing Facility (MSF) as the ceiling. By calibrating VRR and Variable Rate Reverse Repo (VRRR) operations, the RBI keeps the weighted average call rate aligned with the policy repo rate, ensuring orderly money-market conditions, supporting credit flow and anchoring its inflation-targeting objective of containing retail inflation at 4 per cent within a tolerance band of plus or minus 2 per cent.