More Stories

Informist, Friday, Feb. 21, 2025

By Siddhi Chauhan

MUMBAI – The weighted average call rate was near Reserve Bank of India's repo rate of 6.25% on Friday as three variable repo rate tenders added around INR 2 trillion into the banking system liquidity, dealers said. The weighted average call rate fell to 6.29% against 6.35% on Thursday, while the three-day call rate ended at 6.25% against 5.75% for one-loans on Thursday. 

The weighted average triparty repo rate also inched downwards to 6.18% on Friday against 6.20% on Thursday. "Money markets rates have eased sharply today (Friday) despite outflows for GST because banks have borrowed heavily through VRRs." a dealer at a state-owned bank said. "Apart from this, inflows from OMO auction would have also hit the system today(Friday)." During the day, net inflows of INR 460.78 billion largely on account of Thurday's purchase of gilts via open market operation auction and redemption of 91-day Treasury bills aided deficit, dealers said. 

During the day, the central bank infused INR 1.94 trillion through three rate repo operations. At the 45-day rate repo operation, the central bank accepted all INR 579.51 billion against notified amount of INR 750 billion. At the 14-day rate repo operation, RBI accepted all bids worth INR 410.46 billion against INR 750 billion notified. At the three-day variable repo operation, the central bank accepted all bids worth INR 949.27 billion against notified amount of INR 1.75 trillion.  

While participation in the 14-day and three-day repo tender met market expectation, lower-than-expected demand at the 45-day repo tender left most market participants puzzled, dealers said. "I think, including us, most of the market expected the 45-day VRR to be fully subscribed. It is quite shocking for us to see such a lukewarm response," a dealer at a state-owned bank said. "I am guessing that having met their demand through other VRRs, banks would have not preferred to borrow since it is a reporting Friday. Banks prefer to maintain a lower cash balance on the last day of reporting Friday if they have already met the average earlier as it gets transferred into SDF."

As per the prudential norms, banks are required to maintain a cash reserve ratio with the central bank averaged across the fortnight. In the fortnight ending Friday, banks are supposed to maintain an average cash balance of INR 9.12 trillion with the RBI. On Thursday, banks had maintained a cash balance of INR 8.88 trillion, data from the RBI showed. As per RBI data, eight out of 13 working days in the fortnight, banks had maintained a higher than required amount with the central bank. 

Apart from this, outflows for goods and services tax likely drained around INR 800 billion to INR 1 trillion from banking system, dealers said. Dealers pegged the total amount of outflows for the same at INR 1.5 trillion to INR 1.7 trillion over the next few days. Apart from this, no other inflows or outflows were scheduled for the day. On Thursday, the net liquidity injected by the RBI--a proxy for the systemic liquidity deficit--was at INR 1.88 trillion, against INR 1.77 trillion on Wednesday.

OUTLOOK

* Money markets are shut on Saturday. On Monday, 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 the range of 5.75%-6.40%.

CALL RATE

6.25%--Friday's close for three-day loans

6.40%--Friday's open for three-day loans

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

BENCHMARK MIBOR (in %)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: Above repo on demand for funds amid GST payments, reporting Fri

MUMBAI – The interbank call money rate was above the Reserve Bank of India's repo rate of 6.25% on Friday due to demand for funds amid outflows for goods and services tax and funding requirements for a reporting Friday, dealers said. At 0950 IST, the three-day call was at 6.40% on Friday, against 5.75% for one-day loans on Thursday. 

The weighted average call money rate was 6.40% at 0950 IST, against 6.45% around the same time on Thursday. Meanwhile, the weighted average rate in the larger tri-party repo market--which includes mutual funds--was 6.24%, against 6.29% around the same time on Thursday. 

On Thursday, the net liquidity injected by the RBI--a proxy for the systemic liquidity deficit--was at INR 1.88 trillion, against INR 1.77 trillion on Wednesday. "It doesn't seem that GST outflows started yesterday (Thursday), the institutions need to pay by this time but the flow from banking system will start after that," a dealer at a private bank said. "The outflows will definitely start from today (Friday), this is the reason why the RBI has announced VRR worth INR 3.25 trilliion. So major impact will be seen on Monday."  

Outflows for goods and services tax will drain out INR 1.5 trillion to INR 1.7 trillion over the next few days. A significant amount of this is expected to leave the banking system during the day, dealers said. As a result, the three-day variable repo operation, which will be held at 1000-1030 IST for INR 1.75 trillion, is expected to see good demand, with the central bank likely to set the cut-off at 6.26%. 

RBI will also conduct a 14-day and a 45-day variable rate repo auction for a total of INR 1.50 trillion. Some banks may be seen bidding aggressively for the longer tenure repo tenders. "I feel that what we need right now is durable liquidity, day-to-day liquidity and rates is still being controlled through overnight VRRs," a dealer at a state-owned bank said. "So, I would prefer to bid aggressively in the longer tenure VRRs than the overnight (three-day) one." 

Following are the other highlights:

* Reversal of two overnight variable rate repo tender will drain INR 1.33 trillion from the banking system.

* Reversal of four-day variable rate repo tender will drain INR 574.13 billion from the banking system.

* Scheduled net inflows worth INR 460.78 billion largely due to Thurday's OMO buy auction. 

* During the day, the call rate is seen in a range of 5.75-6.45%. (Siddhi Chauhan)

End

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.