More Stories

Informist, Tuesday, Jul. 1,  2025

 

By Siddhi Chauhan and Vaishali Tyagi

 

MUMBAI – The extension of the call money market's trade timings from Tuesday is unlikely to push up volume or reduce banks parking funds with the Reserve Bank of India's Standing Deposit Facility, market participants said. Both banks and standalone primary dealers have marginal use cases for the extension, but the market's dynamics are unlikely to change significantly.

 

The RBI Wednesday said the call money market will close at 1900 IST starting Tuesday compared with 1700 IST earlier, in line with recommendations of a working group headed by RBI Executive Director Radha Shyam Ratho last month. The central bank also said that the collateralised triparty repo and market repo segments would close at 1600 IST from Aug. 1. All money markets open at 0900 IST.

 

For banks, large-scale disbursements or other cash flows from their main lending and deposit operations sometimes led to headaches in managing by 1700 IST, especially amid a 24x7 banking system, dealers said. The extension would allow access to cheaper overnight liquidity at 5.25-5.40% amid a surplus in the banking system, rather than dipping into the RBI's Marginal Standing Facility, which has a rate of 5.75%.

 

Regardless, call market dealers said trade volume would be muted initially in the extended trading hours as banks learn how to most effectively use the system. Overall call market volume may rise by around 10% eventually from the average of around INR 140 billion in June, dealers said. At the same time, banks' tendency to park a large quantum of funds at the SDF is unlikely to reduce, as demand is unlikely to be sizeable to mop-up the cash excess, dealers said.

 

"Call rates are generally high only towards the beginning of the trade; it usually settles in the second half. As a bank if I am giving funds to someone, I will ensure that it is above SDF rate (of 5.25%)," a dealer at a private sector bank said. "Otherwise, I will park whatever excess I have under SDF even after market extension." According to latest RBI data, funds parked under the Standing Deposit Facility were at INR 1.54 trillion Sunday, slightly up from INR 1.51 trillion Saturday.

 

Standalone primary dealerships had recommended the change, the working group's report said. Primary dealers are market makers and provide quotes to end-investors on a variety of fixed income instruments. The extensions give more room to manage funding requirements and push through trades to clients, dealers said. Trade in securities which are not settled on the RBI's Negotiated Dealing System – Order Matching platform and non-statutory liquidity ratio eligible instruments, would also be settled in an easier manner. Some of these non-SLR instruments such as commercial papers and certificates of deposit are not executed, or the transaction doesn't take place, leading to a liquidity mismatch even after 1700 IST, dealers said.

 

"It was a demand for a long time, and it was a low-hanging fruit for the RBI to deliver on," a trading head at a primary dealership said. "The biggest use will be in managing flows from g-sec (government security) settlement a bit easier, which would happen past market hours."

 

The logistics of a 10-hour trading day have already been thought through at most institutions, and will be implemented Tuesday. Banks are likely to use shifts for their asset-liability managers and call market dealers, with some traders anchoring the volume bunched up in the first half and others in the second half. Most of the call market volume is still likely to be met by 1230 IST, from both banks and primary dealerships, dealers said. 

 

"At our bank, the staffing is already staggered", a dealer at a state-owned bank said. "Already some people are always there till 0830 (2030 IST) for the settlement of gilts."

 

Traders said the change in the collateralised money markets – the market repo and triparty repo – from Aug. 1 is likely to lead to a greater change in liquidity management dynamics across financial institutions. Those markets include a wider variety of participants, including mutual funds, and their combined volume is nearly 40 times the call market's size. That will create greater arbitrage opportunities for traders between the unsecured and secured funding markets, dealers said.  End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

With inputs from Aaryan Khanna

Edited by Deepshikha Bhardwaj

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

 

Informist Media Tel +91 (22) 6985-4000 

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2025. All rights reserved.