The Reserve Bank of India has announced its plan to conduct a substantial variable rate repo auction worth ₹1 trillion, scheduled for January 7, 2026. This monetary policy operation will span two days and represents a significant liquidity management initiative by the central bank.

Auction Details

The upcoming repo auction will utilize a variable rate mechanism, allowing participating banks to bid at different interest rates for the available funds. The substantial size of ₹1 trillion indicates the RBI's commitment to ensuring adequate liquidity in the banking system.

Monetary Policy Implications

Variable rate repo auctions serve as crucial tools for the RBI to manage short-term liquidity in the banking system. Through this mechanism, banks can access funds from the central bank by pledging government securities as collateral. The variable rate structure allows market dynamics to influence the final borrowing costs, with banks submitting bids at their preferred interest rates.

Market Operations Framework

The 2-day duration of the auction provides flexibility for both the central bank and participating financial institutions. This extended timeframe allows for comprehensive participation from banks across different categories and regions, ensuring broader access to the liquidity being offered through this operation.

The scheduled auction represents part of the RBI's ongoing efforts to maintain optimal liquidity conditions in the financial system, supporting the smooth functioning of money markets and ensuring adequate fund availability for lending operations.

The Reserve Bank of India's newly constituted Payments Regulatory Board held its inaugural meeting in Mumbai on Monday, January 5, marking a significant milestone in India's payment system governance. The meeting was chaired by Governor Sanjay Malhotra and brought together key stakeholders to operationalize the new regulatory framework for payment systems.

Strategic Vision and Regulatory Framework

The board meeting focused extensively on reviewing the draft Payments Vision 2028, providing strategic guidance to further develop India's payment ecosystem. This vision comes at a crucial time as India's digital payments sector anticipates unprecedented growth, with PwC projecting transaction volumes to nearly triple by FY30. The Payments Regulatory Board was established following amendments to the Payment and Settlement Systems Act, 2007, which came into effect in May 2025.

Comprehensive Review and Analysis

During the meeting, members conducted a thorough review of the functions of the Department of Payment and Settlement Systems. The session examined both domestic and global payment landscapes, ensuring India's regulatory approach remains aligned with international best practices while addressing local market needs. The board discussed key focus areas across domestic and global payment systems to enhance the regulatory framework.

Digital Payments Survey and Future Outlook

The meeting featured key findings from RBI's recent Survey on Digital Payments, which provided valuable insights into usage patterns and adoption trends across the country. These findings will inform policy decisions and help shape the regulatory framework to support continued growth in digital payment adoption. The Payments Regulatory Board is expected to play a central role in shaping India's payment systems, with a focus on enhancing efficiency, security, and innovation while maintaining the stability and integrity of the payment ecosystem.