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Informist, Saturday, Mar. 29, 2025

By Vidhushi RajPurohit

MUMBAI – The interbank call money rate fell below the standing deposit facility rate of 6.25% Saturday due to muted demand for funds from banks, dealers said. Improved liquidity conditions in the banking system and heavy borrowing on Friday also contributed to low activity in the interbank borrowing market. 

The four-day call money rate closed at 5.80%, against 7.00% Friday for five-day loans. Money markets are shut on Monday for Id-ul-Fitr and on Tuesday due to banks' annual closing of accounts. On Friday, money market rates were trading sharply above the marginal standing facility rate due to heavy demand for funds from banks before the end of the financial year, dealers said. 

Having met their funding requirement for the weekend, the activity in the interbank borrowing market remained muted. Trading volumes waned with only 20 trades worth INR 4.57 billion against INR 100.32 billion on Friday. Low funding requirements on Saturday eased the weighted average money market rates as well. The weighted average call rate was at 5.89% Saturday, down from 7.12% on Friday, while the weighted average rate in the larger tri-party repo market, which includes mutual funds, was at 6.06%, against 6.69% Friday.

Net liquidity injected by the central bank, a proxy for liquidity deficit, dropped to INR 130.30 billion from INR 407.88 billion on Wednesday, RBI data showed. The improvement in systemic liquidity was owing to the inflows from the government's month-end spending, which is pegged at around INR 1.50 trillion to INR 1.75 trillion by dealers.

In the upcoming week, dealers see some probability of liquidity turning into absorption mode on the back of left-over inflows from the salary and pension payments, dealers said. The Reserve Bank of India has also been consistent with its measures to infuse liquidity into the banking system. The central bank is also set to meet market participants on Wednesday to review the current liquidity management framework and collect feedback on a new framework.

On Friday, the central bank skipped announcing the daily variable rate repo auction for Wednesday. As part of its recent liquidity measures amid a sharp tightening of financial conditions, the RBI has been conducting daily variable rate repo operations since Jan. 16.

OUTLOOK

* Money markets are shut on Monday for Id-ul-Fitr and on Tuesday for banks' annual closing of accounts.

* On Wednesday, the one-day call money rate may open above the RBI's repo rate of 6.25% due to demand for funds from banks early in the day to meet their reserve requirements.

* During the day, the call rate is seen in a range of 5.75-6.40%, dealers said.

CALL RATE

5.80%--Saturday's close for four-day loans

6.00%--Saturday's open for four-day loans

7.00%--Friday's close for five-day loans

End

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

Edited by Tanima Banerjee

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