More Stories

Informist, Monday, Apr. 21, 2025

By Christina Titus 

MUMBAI – The inter-bank call money rate ended above the Reserve Bank of India's Standing Deposit Facility of 5.75% due to outflows on account of goods and services tax, dealers said. "There was some demand in the day (Monday) due to goods and service tax payments. However, the system has sufficient liquidity to manage GST outflows," a dealer at a public sector bank said. 

The one-day call money rate closed at 5.87%, the same as the weighted average rate. During the day, the call rate moved in the range of 4.95-6.05%. The volume rose sharply to INR 184.23 billion from INR 15.56 billion on Saturday. The total money market volume, including tri-party repos, was INR 6.26 trillion Monday. 

The RBI net absorbed INR 1.00 trillion on Sunday from the banking system, with banks parking INR 1.06 trillion at the RBI's Standing Deposit Facility. The liquidity surplus has come down sharply from INR 2.14 trillion on Thursday despite the long weekend. Indian markets were shut on Friday for Good Friday. 

Some dealers said the major part of outflows on account of goods and service tax had already happened last week, pushing down the liquidity surplus. The adequate liquidity in the system was evident from the low response to the overnight variable rate repo auction held Monday. The market participants borrowed INR 63.32 billion from the RBI, much lower than the notified amount of INR 1.00 trillion.

The system liquidity is good at the start of the financial year, a dealer at a private sector bank said. "System liquidity will be slightly impacted when credit growth picks up. Going ahead, I expect the call rate to hover between the SDF and repo rate." He further said the system liquidity will get back to INR 2.00 trillion by the end of the month on account of government spending. 

Most participants depend on the money market to meet their fund requirements due to cheaper availability of funds, which is also a reason behind the low demand at the variable rate repo auction Monday, dealers said. Since the banking system has surplus liquidity, market participants are unsure of the reason behind the high-ticket VRR auctions by the RBI. 

"... The surplus is likely to narrow at the start of this week on account of GST outflows, which could push overnight rates higher, despite the INR-200-billion OMO (open market operation) auction scheduled this week," ICICI Bank said in a note Monday.  

OUTLOOK

* Tuesday, the one-day call rate may open below repo rate due to comfortable surplus liquidity and lack of significant outflows, dealers said. 

* During the day, the call rate is seen at 5.60-6.00% and the triparty repo rate at 5.50-6.00%.

* RBI will hold an overnight variable rate repo auction for INR 1.25 tln 1000-1030 IST.

CALL RATE

5.87%--Monday close for one-day loans

5.93%--Monday open for one-day loans

5.40%--Saturday close for two-day loans

BENCHMARK MIBOR (in %)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: Near repo rate; demand for funds seen on GST outflows

MUMBAI – The inter-bank call money rate opened near the Reserve Bank of India's repo rate of 6.0% due to demand for funds owing to the expected outflow on account of payment of the goods and service tax, dealers said. "The money market rates will be on the higher side Monday. I expect it to breach (the) repo rate and hover around 6.05-6.10% for the day," a dealer at a private sector bank said. Market participants estimate the tax outflow will be around INR 1 trillion.

The one-day call money rate opened at 5.93%, and the weighted average rate was at 5.93%. The RBI net absorbed INR 2.14 trillion on Thursday from the banking system –- a proxy for liquidity surplus –– up from INR 1.70 trillion Wednesday. Banks had parked INR 2.36 trillion at the RBI's Standing Deposit Facility Thursday.

Despite the outflows, market participants do not see any major impact on liquidity due to the measures the RBI has taken in recent weeks to support liquidity. The regulator Thursday announced an overnight variable rate repo auction for INR 1 trillion, much higher than the usual amount of INR 250 billion. The higher amount auction is seen as a move to support liquidity in the face of the goods and services tax payment outflows, according to dealers.  

However, demand at the overnight variable rate repo auction is expected to be tepid with market participants seen borrowing just INR 400 billion, much lower than the notified amount of INR 1 trillion, according to an Informist poll.

Primary dealers are expected to bid more at the variable rate repo auction to manage payments related to government securities auctioned Thursday, a dealer at a primary dealership said. The RBI sold INR 300 billion of government bonds at the auction Thursday. Other participants, while, will tend to borrow from the money market due to cheaper availability of funds in that avenue.  (Christina Titus)

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.