Unique prepayment option to drive banks’ demand for 90-day VRR

The Reserve Bank of India’s announcement of an INR-250-billion, 90-day variable rate **repo auction Friday has brought confusion among market participants due to the unusually long length of the operation. That initial hesitation has turned to anticipation of full subscription after the [RBI](https://informistmedia.com/)** introduced a unique prepayment option for subscribers at the auction. On Tuesday, the RBI said participants will have an option to prepay the amount borrowed at the 90-day VRR auction at least two days prior to the original date of reversal, which is Apr. 30. However, there is no option for partial prepayment; participants must repay the entire amount that they borrow at the auction. Still, the auction is likely to be oversubscribed with the cut-off being higher than the minimum 5.26%.