More Stories

Informist, Monday, Jan. 6, 2025

By Vidhushi RajPurohit

MUMBAI – The interbank call money rate ended below the Reserve Bank of India's Standing Deposit Facility rate on Monday as the liquidity deficit in the banking system narrowed after inflows from month-end spending by the government, dealers said. However, tax-related outflows and RBI's dollar sales in the foreign exchange market continued to exert some pressure on systemic liquidity.

The one-day call money rate ended at 5.75%, unchanged from two-day loans on Saturday. At the day's close, the weighted average triparty repo rate was at 6.55% and for the call money market, the weighted average rate was at 6.65%. 

Liquidity conditions in the banking system eased, as shown by the net liquidity injected by the RBI, a proxy for the liquidity deficit. Liquidity injection on Sunday was at INR 289.58 billion, down from INR 386.14 billion Friday. Month-end inflows from the government helped the systemic deficit to moderate, dealers said. The amount of inflows from salary and pension payments by the government since Dec. 31 is pegged at around INR 1.50 trillion.

On Monday, payment for gilts auctioned on Friday led to an outflow of INR 320 billion, which pushed up money market rates in early trading hours. "The rates eased today (Monday), as traders borrowed funds near the opening trading hours when we saw call rates were high (6.75%)," a dealer at a private bank said. "But mostly traders are waiting for the tax outflows to pass to gauge the liquidity conditions, and they are avoiding lending funds now."

Market participants remain cautious about the systemic liquidity, which, though it has improved, is still under pressure from outflows for tax deducted at source and excise duty payments Tuesday. Around INR 500 billion is expected to leave the banking system on account of tax outflows Tuesday, dealers said. Dollar sales by the RBI in the foreign exchange market to support the rupee also continued to strain the systemic liquidity. On Monday, the domestic currency settled at 85.8275 against the dollar, ending at a record closing low for the tenth consecutive day.

To provide a boost to systemic liquidity, after market hours, the RBI announced a three-day variable rate repo auction for INR 500 billion to be held on Tuesday at 1000-1030 IST. Meanwhile, dealers also expect the RBI to provide some durable support to liquidity, if the systemic deficit persists this month. On Friday, after market hours, RBI data showed the central bank bought INR 200 million worth of gilts through screen-based open market operations on Dec. 27.

However, the amount was too small to make a dent in the liquidity deficit, dealers said. Traders also await the upcoming buyback of INR 250 billion worth of five bonds maturing in 2025-26 (Apr-Mar) on Thursday for fresh cues on liquidity conditions.

The following are the other highlights:

* Payment of gilt auction led to an outflow of INR 320 billion Monday.

* Reversal of funds parked at the Standing Deposit Facility added INR 942.35 billion to the banking system.

OUTLOOK

* On Tuesday, the one-day call rate may open above the repo rate of 6.50% on demand for funds amidst tax outflows.
* During the day, the call rate is seen in a range of 6.00-6.80%, dealers said.

CALL RATE

5.75%--Monday's close for one-day loans

6.75%--Monday's open for one-day loans

5.75%--Saturday's close for two-day loans

BENCHMARK MIBOR (in per cent)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: At MSF rate on demand from banks as RBI liquidity support falls

NEW DELHI – The interbank call money rate was at the Reserve Bank of India's Marginal Standing Facility rate of 6.75% due to demand for funds from banks in early trade. The decrease in the central bank's liquidity support, through variable rate repo operations, also pushed up interbank rates, dealers said.

At 1000 IST, the one-day call money rate was at 6.75%, against 5.75% for two-day loans on Saturday. The weighted average call rate was above the repo rate on Friday due to the reversal of a four-day variable rate repo operation worth INR 832.38 billion.

"Since the reversal of the repo operations (on Friday), there is some stress in the system," a dealer at a state-owned bank said. "Since the deficit itself is coming down, the RBI also may not give further VRRs unless rates become disorderly."

Liquidity conditions in the banking system have been becoming more comfortable, with net liquidity injected by the RBI on Friday falling to INR 386.14 billion from INR 674.45 billion on Thursday. Liquidity conditions improved sharply due to around INR 1.5 trillion of the government's month-end spending.

The payment for the INR 320-billion gilt auction on Friday also led to some demand for funds from banks. Moreover, banks want to meet their funding requirements early as they do not expect a variable rate repo auction from the RBI, despite INR 600 billion to INR 700 billion of outflows related to excise duties and tax deducted at source expected to begin from Tuesday, dealers said.

"TREPS (Triparty repo) rates are high, which is showing up in the call market also," a dealer at a private bank said. "We are not sure why mutual funds are not tendering cash there, but certainly the market is skewed towards demand for cash today (Monday)." The weighted average triparty repo rate was 6.50%. (Aryan Khanna)

The following are the other highlights:

* The weighted average call rate was 6.75%, against 6.12% on Saturday.

* The weighted average rate for triparty repo was 6.50%, against 6.34% on Saturday.

* Reversal of the standing deposit facility will add INR 998.05 billion to the banking system

* During the day, the call rate is seen in a range of 6.20-6.80%.

End

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

Edited by Ashish Shirke

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.