More Stories

Informist, Thursday, Mar. 27, 2025

 

NEW DELHI – The overnight Mumbai Interbank Offered Rate was set below the repo rate on Thursday for the first time since Nov. 13, signalling comfortable rupee liquidity conditions even near the end of the financial year on Monday. The benchmark rate for overnight uncollateralised lending was set at 6.24% on Thursday, just below the repo rate of 6.25%, and down from 6.31% on Wednesday. On an absolute basis, it was the lowest since February 2023.

 

The fall in overnight rates corresponds to easing liquidity conditions in the banking system, aided by the Reserve Bank of India's mammoth durable liquidity injection and the government's month-end spending. Starting with a cut in the cash reserve ratio for banks in December, the central bank has infused over INR 6 trillion on a durable basis through foreign exchange swaps and open market gilt purchases. Daily variable rate repo operations have helped meet frictional liquidity needs and keep a cap on money market rates, while long-term variable rate repos worth INR 1.83 trillion maturing in early April have helped meet seasonal tightness due to large outflows in March, dealers said.

 

With the settlement of the RBI's dollar/rupee buy/sell swap worth $10.04 billion and INR 445.41-billion open market operation auction on Wednesday, its net liquidity injected -- a proxy for the systemic liquidity deficit -- fell to INR 407.88 billion, the lowest since Mar. 4. The overnight MIBOR was last set below the repo rate on Nov. 13, when the banking system was flush with funds, and the RBI absorbed over INR 2 trillion, data shows. 

 

The move is even more telling because the overnight MIBOR rate typically peaks at the quarter and year-end. In the last week of FY24, the overnight MIBOR was set above the then Marginal Standing Facility rate of 6.75% every day of the week. On Dec. 31, the overnight MIBOR rate surged to 7.15%, against the 6.50% repo rate, and the highest since the last trading day of FY24. Call market dealers do not expect such a sharp spike to be repeated on the last trading day of FY25 on Friday, with liquidity also likely to return to surplus for the first time since mid-December, they said.  End

 

Reported by Aaryan Khanna

Edited by Ashish Shirke

 

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 (11) 4220-1000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2025. All rights reserved.