More Stories

Informist, Wednesday, Mar. 12, 2025

By Siddhi Chauhan

MUMBAI – The weighted average call rate eased to near the Reserve Bank of India's repo rate of 6.25% as demand for funds eased due to an improvement in liquidity conditions, dealers said. According to data from the RBI, the net liquidity injected by the central bank – a proxy for systemic liquidity conditions – reduced to INR 1.05 trillion on Tuesday from INR 1.45 trillion on Monday.

The weighted average call rate ended at 6.27%, down from 6.30% on Tuesday. Meanwhile, the triparty party weighted average rate was at 6.13%, unchanged from the previous day. The one-day call money rate ended at 6.25% against 5.80% on Tuesday. The cool-off in money market rates on Wednesday was contrary to market expectations, as most traders expected rates to harden due to upcoming corporate advance tax payments, dealers said. 

"Yesterday (Tuesday), we were expecting money market rates to rise as the first tranche of advance tax was supposed to happen today (Wednesday). This did not happen because the deficit has fallen, and also it seems that the first tranche of outflow was not that significant," a dealer at a private bank said. "This is also why we didn't see good participation at VRR (variable rate repo). I think tomorrow (Thursday), a good chunk of outflows will take place." Outflows on account of advance tax payments due by Saturday are expected to drain around a total of INR 2 trillion to INR 2.6 trillion from the banking system, dealers said. 

The net liquidity injected likely narrowed due to government spending, dealers said. A few market players also expect inflows into some mutual fund schemes to have eased pressure on money market rates.

While the central government has generally had to tighten its purse strings towards the end of the financial year to meet its fiscal targets, latest data shows the Centre's total expenditure in Apr-Jan was at 75.7% of the revised estimate for 2024-25 (Apr-Mar), suggesting little need for the goverment to hold off spending in the current month. "We are nearing towards financial year end and since the government has not met its spending target they might try to spend more," a dealer at a state-owned bank said. 

The impact of the improvement in liquidity was also apparent as banks increased their funds parked under the standing deposit facility to 1.10 trillion on Tuesday. As per data from RBI, funds parked under the standing deposit facility were at INR 856.88 billion on Monday. 

The fall in money market rates also dampened demand at the overnight variable rate repo operation, dealers said. The central bank got bids worth INR 181.86 billion on Wednesday against the notified amount of INR 500 billion.

OUTLOOK

* On Thursday, the four-day call rate may open above 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% and the triparty repo rate in 5.75-6.25%.

* The RBI will conduct a 4-day variable rate repo auction for INR 500.00 billion at 1000-1030 IST and an 8-day VRR auction for INR 1 trillion at 1100-1130 IST.

CALL RATE

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

6.35%--Wednesday's open for one-day loans

5.80%--Tuesday's close for one-day loans

BENCHMARK MIBOR (in %)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: Above repo rate on demand for funds; triparty rate below repo

MUMBAI – The interbank call money rate was above the repo rate of 6.25% early on Wednesday due to demand for funds from banks, dealers said. "This is just in the first hour. As the day goes on, both call and TREPS (triparty repo) rates will fall from here because overall liquidity is better," a dealer at a private bank said.

At 1045 IST, the one-day call rate was at 6.30%, while the weighted average call rate was at 6.34%. However, the weighted average rate in the larger triparty repo market was sharply lower at 6.17%.

According to data from the Reserve Bank of India, the net liquidity injected by the central bank--a proxy for systemic liquidity conditions--reduced to INR 1.05 trillion on Tuesday from INR 1.45 trillion on Monday. "There were inflows into mutual funds due to year-end and some government spending also came in, which is reflecting in the liquidity," a dealer at a state-owned bank said.

While the central government has generally had to tighten its purse strings towards the end of the financial year to meet its fiscal targets, latest data shows the Centre's total expenditure in Apr-Jan was at 75.7% of the revised estimate for 2024-25 (Apr-Mar), suggesting little need for the goverment to cut spending in the current month.

Following are the other highlights:

* Reversal of Tuesday's overnight variable rate repo auction will drain INR 157.91 billion from the banking system.

* Wednesday sees scheduled outflows of INR 394.55 billion, largely on account of payment for state bonds auctioned on Tuesday.

* During the day, the call rate is seen in a range of 5.75-6.40% and the triparty repo rate at 5.75-6.25%.

End

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

Edited by Saji George Titus

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.