More Stories

Informist, Thursday, Feb. 6, 2025

By Kabir Sharma

MUMBAI – The interbank call money rate ended below the repo rate again on Thursday as demand for funds from banks eased towards the end of trade, dealers said. The one-day call money rate ended at 6.25%. While this was up from Wednesday's close of 5.75%, the weighted average rate was little changed at 6.45%, down a marginal 1 basis point from Wednesday as liquidity conditions remained benign. In the larger triparty repo market, the weighted average rate was unchanged from Wednesday's 6.25%.

On Wednesday, the net liquidity injected by the Reserve Bank of India--a proxy for systemic liquidity deficit--was INR 450.06 billion, up slightly from INR 382.16 billion Tuesday.

"Rates are trending lower because a 25 bps (repo rate) cut is bound to happen. We may also see a stance change to accommodative, but that is not for sure," a dealer at a state-owned bank said. The Monetary Policy Committee, which began its three-day meeting Wednesday, is widely expected to lower the repo rate by 25 basis points to 6.25%. This would be the first interest cut in nearly five years. RBI Governor Sanjay Malhotra will announce the MPC's decision at 1000 IST Friday.

Starting Friday, INR 400 billion-INR 500 billion worth of outflows are expected for tax deducted at source payments, dealers said. However, the RBI has already taken measures to counter upcoming outflows, with the central bank set to conduct a three-day variable rate repo for INR 1.5 trillion and a 56-day auction for INR 500.00 billion on Friday. Dealers, though, see the 56-day auction being "a bit tricky" as the operation reverses only in April and it is difficult to assess what liquidity conditions might be like at the start of the next financial year.

OUTLOOK

* On Friday, the three-day call rate may open above the RBI's repo rate of 6.50% due to demand for funds from banks early in the day to meet reserve requirements.

* During the day, the call rate is seen in a range of 6.00-6.70%, dealers said, although eyes will be on the MPC's interest rate decision.

CALL RATE

6.25%--Thursday's close for one-day loans

6.55%--Thursday's open for one-day loans

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

BENCHMARK MIBOR (in %)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: Above RBI's repo rate; liquidity deficit little changed from Tue

MUMBAI – The interbank call money rate was at the Reserve Bank of India's repo rate of 6.50% due to demand for funds from banks to meet reserve requirements early in trade, dealers said. At 0945 IST, the one-day call money rate was at 6.50%, against 5.75% on Wednesday's close.

At 0945 IST, the weighted average call rate was at 6.55% against 6.57% on Wednesday. The weighted average triparty repo – a larger funding market that includes mutual funds – rate was at 6.26%, against 6.28% on Wednesday. 

On Wednesday, net liquidity injected — a proxy for systemic liquidity deficit – was at INR 450.06 billion from INR 382.16 billion on Tuesday. Despite scheduled net outflows worth INR 306.71 billion, the liquidity deficit was little changed.

According to RBI data, banks reduced funds parked at the standing deposit facility window on Wednesday to INR 1.48 trillion against INR 1.59 trillion on Tuesday.

"Market liquidity has come down by around INR 100 billion, banks have withdrawn a similar amount from the SDF also," a dealer at a private bank said. "This could be the reason why we did not see a significant change in deficit despite state bond outflows."

Amid a much more comfortable liquidity and cheap availability of funds, the overnight variable rate repo auction for INR 250 billion at 1000 IST-1030 IST is expected to be undersubscribed, dealers said. The central bank is expected to set a cut-off of 6.51%. 

During the day, while the weighted average triparty repo rate is expected to trade in the range of 6.25-6.30%, the weighted average call rate may remain in the band of 6.45-6.55%, dealers said. Corporates' loan repayments are also scheduled, and the flow of payments may keep trade volumes in the call market higher.

Money market rates may see pressure on Friday due to outflows of tax deducted at source and excise duty which will drain around INR 500 billion to INR 700 billion from the banking system, dealers said. 
 

Following are the other highlights:

* Net outflows of INR 18.64 billion largely for payment of Treasury bills. 

* Reversal of funds parked at the Standing Deposit Facility will add INR 1.46 trillion to the banking system.

* Reversal of the overnight variable rate repo tender will drain INR 211.80 billion from the banking system.

* During the day, the call rate is seen in a range of 6.00-6.70%. (Siddhi Chauhan)

End

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

Edited by Akul Nishant Akhoury 

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.