India Call
Ends at RBI's repo rate on firm demand for funds from banks
This story was originally published at 19:25 IST on 29 January 2025
Register to read our real-time news.Informist, Wednesday, Jan. 29, 2025
By Kabir Sharma
MUMBAI – The interbank call money rate ended at the Reserve Bank of India's repo rate of 6.50% Wednesday due to demand for funds from banks amid tight liquidity conditions in the banking system, dealers said. The one-day call money rate ended at 6.50%, against 6.55% on Tuesday.
The weighted average call rate was higher at 6.58%, against 6.55% Tuesday. On Wednesday, the weighted average triparty repo rate was 6.46%, against 6.53% the previous day.
The net liquidity injected by the Reserve bank of India--a proxy for systemic liquidity conditions--was INR 2.51 trillion Tuesday, lower than INR 3.10 trillion injected Monday. The narrowing of the deficit was likely due to inflows from the government's month-end spending, according to dealers. Dealers said a total inflow of INR 1.0 trillion to INR 1.2 trillion into the banking system is expected from government spending, but in tranches.
"A drop in deficit and infusion of funds through VRR (variable rate repo) auction has led the money market rates to fall down from the morning," a dealer at a state-owned bank said. "Rates are expected to fall further with the central bank infusing liquidity through its various operations in the coming days."
On Thursday, the RBI will buy five gilts through an open market auction, a first since September 2021. This auction will add up to INR 200 billion to the banking system. On Friday, the RBI will inject liquidity into the banking system by conducting a dollar/rupee buy/sell swap of $5 billion, for a six-month tenor.
Following are the other highlights:
* Wednesday's overnight variable rate repo auction saw INR 1.67 trillion being borrowed from the RBI, with the reversal of Monday's tender seeing the exit of INR 1.39 trillion.
* Reversal of funds parked at the Standing Deposit Facility added INR 615.41 billion to the banking system.
OUTLOOK
* On Thursday, the one-day call rate may open around the repo rate on demand for funds from banks.
* During the day, the call rate is seen in a range of 6.00-6.90%, dealers said.
* RBI will conduct an overnight variable rate repo auction for INR 1.50 trillion at 1000-1030 IST Thursday.
CALL RATE
6.50%--Wednesday's close for one-day loans
6.65%--Wednesday's open for one-day loans
6.55%--Tuesday's close for one-day loans
BENCHMARK MIBOR (in %)
Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:
TENURE | WEDNESDAY | TUESDAY |
Overnight | 6.65 | 6.63 |
3-day | -- | -- |
14-day | 7.00 | 7.00 |
1-month | 7.10 | 7.10 |
3-month | 7.29 | 7.29 |
India Call:Above RBI's repo rate; liquidity improves on govt month-end spend
MUMBAI – The interbank call money rate was above the Reserve Bank of India's repo rate of 6.50% on Wednesday due to demand for funds from banks in early trade, dealers said. At 0940 IST, the one-day call money rate was at 6.60%, against 6.55% on Tuesday.
At 0930 IST, the weighted average triparty repo was at 6.56%, against 6.49% on Tuesday. The weighted average call rate was at 6.65% on Wednesday, against 6.63% around the same time on Tuesday.
On Tuesday, the net liquidity injected by the RBI--a proxy for systemic liquidity conditions--was at INR 2.51 trillion, against INR 3.10 trillion on Monday. The narrowing of the deficit was likely due to inflows from the government's month-end spending, dealers said.
During the day, inflows from the government's month-end spending are expected to add another INR 500 billion to INR 600 billion. These inflows will add a total of INR 1 trillion to INR 1.2 trillion into the banking system in tranches, dealers said. Generally, inflows for the same are above INR 1.5 trillion. However, this time the government may not spend excessively ahead of the Union Budget for 2025-26 (Apr-Mar) on Saturday, resulting in just mandatory spending for salaries and pensions, dealers said.
In the coming days, the pressure on banking system liquidity is expected to ease slightly due to various liquidity operations announced by the RBI, dealers said. On Thursday, the central bank will buy five gilts through an open market auction, the first since September 2021. This auction will add up to INR 200 billion to the banking system. On Friday, the RBI will inject liquidity into the banking system by conducting a dollar/rupee buy/sell swap of $5 billion, for a six-month tenor.
At 1000-1030 IST, the RBI is conducting an overnight variable rate repo auction for a notified amount of INR 1.75 trillion. Market participants expect the auction to see bids ranging from INR 1.2 trillion to INR 1.75 trillion with a cut-off rate of 6.51%.
Following are the other highlights:
* Reversal of funds parked at the Standing Deposit Facility will add INR 615.41 billion to the banking system.
* Net outflows worth INR 302.33 billion will be drained out of the banking system during the day, largely due to payments for the state bond auction.
* Reversal of overnight variable rate repo tender will drain INR 1.39 trillion from the banking system
* During the day, the call rate is seen in a range of 6.00-6.90%. (Siddhi Chauhan)
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Subhojit Sarkar
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