RBI liquidity operations — LAF corridor, net liquidity, VRR & VRRR
Quick answerThe RBI manages banking-system cash through its
Liquidity Adjustment Facility (LAF). The policy
corridor runs from the
SDF floor at ~5.0%, through the
repo rate at ~5.25%, to the
MSF ceiling at ~5.5%. When the system is short of cash the RBI
injects via repo /
VRR; when it is flush the RBI
absorbs via reverse repo / SDF /
VRRR. System liquidity has recently been in a modest
surplus of around
Rs 1.5 lakh crore, so the RBI has mostly been absorbing. These are approximate recent values; see
RBI money-market operations for exact figures.
The chart above is a visual summary; the tables below carry the same figures so they are readable without JavaScript — for accessibility and AI answer engines.
LAF policy corridor (approximate recent)
| Corridor level | Rate |
| SDF (floor, absorbs) | 5.00% |
| Repo (policy, injects) | 5.25% |
| MSF (ceiling, injects) | 5.50% |
| Memo: net system liquidity (surplus) | ~Rs 1.5 lakh cr |
LAF instruments — what injects and what absorbs
| Instrument | Direction | What it does |
| LAF repo / VRR (Variable Rate Repo) | Injects | RBI lends to banks against G-secs; main tool when the system is in deficit. |
| Reverse repo / SDF (Standing Deposit Facility) | Absorbs | Banks park surplus cash with the RBI; SDF is the uncollateralised floor of the corridor. |
| VRRR (Variable Rate Reverse Repo) | Absorbs | Auction-based mop-up of surplus liquidity, used when the system is flush. |
| MSF (Marginal Standing Facility) | Injects | Overnight backstop at the corridor ceiling for banks short of funds. |
Approximate recent corridor rates and net-liquidity level based on RBI money-market-operations data; figures are rounded and the exact, latest values are published by the RBI. The 50-bps corridor places the SDF 25 bps below and the MSF 25 bps above the policy repo rate.
What it means for bankers
Liquidity operations are how monetary policy is actually transmitted day to day. The LAF corridor caps how far the overnight weighted average call rate (WACR) can drift from the repo rate, while VRR and VRRR auctions fine-tune the quantum of cash so the WACR stays near target. A liquidity surplus pushes short rates toward the SDF floor and eases funding; a deficit pushes them toward the MSF ceiling and tightens it. Durable liquidity is also shaped by currency in circulation, the CRR and the RBI’s forex operations, and it feeds straight into G-sec yields and bank credit & deposit conditions.
RBI liquidity operations FAQ
What is the Liquidity Adjustment Facility (LAF)?
The LAF is the RBI's main toolkit for managing day-to-day liquidity. Banks borrow cash from the RBI against government securities (a repo, which injects liquidity) or park surplus cash with the RBI (reverse repo / the Standing Deposit Facility, which absorbs liquidity). The LAF keeps the overnight money-market rate close to the policy repo rate.
What is the difference between VRR and VRRR?
VRR (Variable Rate Repo) is an auction in which the RBI lends to banks, injecting liquidity when the system is short of cash. VRRR (Variable Rate Reverse Repo) is the opposite - the RBI borrows from banks, absorbing surplus liquidity. 'Variable rate' means the rate is set by auction rather than fixed, and tenors run from overnight to several days.
What does net injection or net absorption mean?
Net injection means the RBI is on balance adding cash (the system is in deficit and the RBI lends via repo/VRR/MSF). Net absorption means the RBI is on balance draining cash (the system is in surplus and the RBI mops up via reverse repo/SDF/VRRR). India's system liquidity has recently been in a modest surplus of around Rs 1.5 lakh crore, so the RBI has mostly been absorbing.
What is the LAF corridor?
The corridor is the band around the policy repo rate within which the overnight rate moves. The SDF at about 5.0% is the floor, the repo rate at about 5.25% is the centre, and the MSF at about 5.5% is the ceiling. It is normally 50 bps wide - SDF 25 bps below repo, MSF 25 bps above.
Methodology & sources: see how BankPulse dashboards are sourced, verified & updated · machine-readable LAF / liquidity JSON feed.
Source: RBI money-market operations / Liquidity Adjustment Facility (LAF) and Weekly Statistical Supplement,
rbi.org.in. Corridor rates and the net-liquidity level are approximate recent values and are rounded; for exact, latest figures see the RBI. We never reproduce RBI text verbatim. under the editorial review of
Vikram Jain. Last updated 19 Jun 2026, 01:17 IST.