Indian banks to adopt a cautious stance in RBI’s reverse repo auction after cash crunch led to costly overnight borrowing.

• Banks parked ₹2 trillion in the last VRRR despite looming GST outflows; funding assumptions proved costly amid cash shortages.
• WACR and tri-party repo rates jumped 40 bps to 5.73% and 5.72%, exceeding the RBI’s 5.50% repo rate.
• Experts urge the RBI to offer fixed overnight funding or rely more on overnight VRRRs to ease volatility.