More Stories

Informist, Wednesday, Mar. 19, 2025

By Kabir Sharma

MUMBAI – The weighted average call rate ended sharply above the repo rate due to demand for funds from banks in the first half of trade, dealers said. The weighted average rate ended at 6.37% Wednesday against 6.33% Tuesday. "There was huge demand up front in the morning but the rates cooled down after the two VRRs (variable rate repo auctions)," a dealer at a state-owned bank said. The one-day interbank call money rate ended at 5.85% against 6.40% Tuesday.

Rates in the larger triparty repo market, which includes mutual funds, eased below the Reserve Bank of India's repo rate of 6.25% because of inflows from the repo auctions and slight improvement in liquidity conditions, dealers said. The weighted average triparty repo rate fell below the repo rate to end at 6.20% against 6.34% Tuesday. 

The net liquidity injected by the RBI was slightly lower on Tuesday at INR 2.26 trillion, against INR 2.43 trillion on Monday. Dealers expect the figure to widen further in the coming days once the outflows for goods and services tax payments commence Thursday. 

The first variable rate repo auction conducted by the RBI Wednesday was oversubscribed as the central bank got bids for INR 1.49 trillion against the notified amount of INR 1.00 trillion. Owing to the high demand, the central bank announced a second variable rate repo operation of INR 500.00 billion which also saw an 80% subscription with banks bidding for INR 391.38 billion. The cut-off rates for each of the two auctions were set at 6.26%. 

According to dealers, there was excess demand for funds as outflows for payment of goods and services tax are expected to begin Thursday. "GST this time will be higher than usual, we are expecting it to be north of INR 2 trillion," a dealer at another state-run bank said.  

In order to aid liquidity, the RBI Tuesday bought six gilts amounting to INR 500 billion through the second tranche of open market purchase auctions for this month. The settlement of the auction led to inflows Wednesday. However, the inflows from the OMO buy auction were offset by the outflow for the INR 526.20 billion state bond auction payment.

OUTLOOK

* On Thursday, the one-day call rate may open above the repo rate as banks will borrow funds to meet their reserve requirements.

* During the day, the call rate is seen in the range of 5.80-6.50% and the triparty repo rate is seen in the range of 5.75-6.40%.

CALL RATE

5.85%--Wednesday's close for one-day loans

6.45%--Wednesday's open for one-day loans

6.40%--Tuesday's close for one-day loans

BENCHMARK MIBOR (in %)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: Above RBI's repo on demand for funds from banks in early trade

MUMBAI – The interbank call money rate was above the repo rate of 6.25% on Wednesday due to demand for funds from banks in early trade to meet reserve requirements, dealers said. At 1015 IST, the one-day call rate was at 6.30%, as against 6.40% on Tuesday, while the weighted average rate was even higher at 6.45%, against 6.33% on Tuesday. The weighted average rate in the larger triparty repo market was at 6.34%, as against 6.26% around the same time on Tuesday.

Although money market rates were sharply higher due to demand for funds, liquidity conditions were broadly similar to Tuesday. "The liquidity hasn't changed quite sharply. If you see, banks have reduced funds parked under SDF (Standing Deposit Facility) by around INR 250 billion. The cash balance maintained has also reduced," a dealer at a state-owned bank said. "This is hardly anything (new) but what is surprising is the high rates. If you see, call rate has touched the (intraday) high of 6.50%."

As per Reserve Bank of India data, funds parked under the Standing Deposit Facility stood at INR 672.44 billion on Tuesday, down from INR 919.99 billion on Monday. However, the net liquidity injected by the RBI was slightly lower on Tuesday at INR 2.26 trillion, against INR 2.43 trillion on Monday.

While the current elevated borrowing rates are expected to lead to high participation in the daily variable rate repo auction for INR 1.00 trillion, the inflow of INR 500.00 billion as payment for government bonds purchased by the RBI on Tuesday at the open market auction will aid systemic liquidity, dealers said. However, its impact will be cancelled out by the payment for Tuesday's auction of state government securities worth INR 526.20 billion. (Siddhi Chauhan)

Edited by Subhojit Sarkar

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.