The Reserve Bank of India (RBI) on Tuesday said it will conduct an overnight variable rate repo (VRR) auction for a notified amount of Rs 25,000 crore on July 8.

The auction will take place between 9:30 am and 10:00 am on Wednesday, and the funds will be reversed on July 9, according to the RBI's notification.

"On a review of current and evolving liquidity conditions, it has been decided to conduct a Variable Rate Repo (VRR) auction on Wednesday, July 8," the RBI said in a release.

Currently, liquidity in the banking system is estimated to be in surplus of around Rs 1.19 lakh crore as of July 6, according to the RBI's data.

On July 7, the central bank received a muted response on the overnight VRR auction, with just Rs 1,135 crore worth of bids for a notified amount of Rs 50,000 crore. Experts attributed this to the comfortable surplus liquidity in the banking system.

The central bank accepted the entire amount at a cut-off and weighted average rate of 5.26 per cent, according to the release.

The central bank had infused more than Rs 6 lakh crore of transient liquidity to the banking system through various VRR auctions ranging between overnight and seven days since June.