More Stories

Informist, Wednesday, Apr. 30, 2025

By Christina Titus 

MUMBAI –  For the second consecutive day, the inter-bank call money rate closed at the Reserve Bank of India's repo rate of 6.0% due to higher demand from banks to meet their reserve requirements for the fortnight ending Friday, dealers said. Money market rates were slightly high Wednesday as traders borrowed for two days, as Indian financial markets are shut Thursday on account of Maharashtra Day, they said.  

The two-day call money rate closed at 6.00% and the weighted average rate was 5.95%. The call money rate was higher in early trade as a result of delayed month-end spending by the government, a dealer said. Some traders had estimated inflows from the government's salary and pension payments to commence on Monday, which did not materialise. The rates moderated intraday as some month-end inflows are likely to have begun on Wednesday, dealers said. 

"Government spending has started and we estimate total inflows to be more than INR 1 trillion," a dealer at a state-owned bank said. "I think, of which, around INR 500 billion has come into the system already. This will be reflected in the money market operations data next working day (Friday)."   

Trade volume for the two-day loans was INR 179.91 billion on Wednesday, up from INR 167.90 billion Tuesday. Total money market volume, including tri-party repos, was INR 6.02 trillion Wednesday. 

"It is usual for rates to inch up for two-day loans as lenders charge a bit higher rate than the overnight rate," a dealer at a private bank said. "Friday is a reporting day also. So, they (banks) had to meet their cash reserve needs today (Wednesday) only."

The RBI net absorbed INR 806.44 billion from the banking system on Tuesday, down from INR 903.39 billion Monday. The cash parked by banks at the RBI's Standing Deposit Facility fell slightly to INR 1.22 trillion on Tuesday from INR 1.33 trillion Monday. "We expect the liquidity surplus between INR 2.5 trillion and INR 3 trillion by end of May owing to inflows from government's month-end spending, RBI's dividend around INR 3 trillion, and consistent liquidity measures," a dealer at a private sector bank said. 

"There were corporate outflows of INR 70 billion–INR 80 billion," the dealer said. "They wanted to lower their risk amid fear of escalation of tension between India and Pakistan."  

The two-day variable rate repo auction on Wednesday received a much better response compared to previous days. The auction received bids of INR 149.52 billion, lower than the notified amount of INR 500 billion. "Some anticipation (higher rates in money market) might have triggered, increasing the response today (Wednesday)," a dealer at another state-owned bank said.

After market hours, the central bank announced a 14-day variable rate repo auction for INR 250 billion under its fortnightly fine-tuning liquidity management operation. At the last 14-day variable rate repo auction held on Mar. 7, market participants borrowed only INR 83.75 billion, against the notified amount of INR 500 billion. The central bank has not conducted 14-day variable rate repo auctions since Mar. 7, citing a review of current and evolving liquidity conditions in each subsequent fortnight.

OUTLOOK

* On Friday, the three-day call rate may open near the RBI's repo rate on demand in early trade, dealers said.

* During the day, the call rate is seen at 5.50-6.00% and the tri-party repo rate at 5.50-6.10%.

* RBI will hold a three-day variable rate repo auction for INR 250 billion at 1000-1030 IST.

* RBI will hold a 14-day variable rate repo auction for INR 250 billion at 1100-1130 IST.

CALL RATE

6.00%--Wednesday close for two-day loans

6.00%---Wednesday open for two-day loans

6.00%--Tuesday close for one-day loans

BENCHMARK MIBOR (in %)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: At repo rate; pressure seen on rate due to fortnightly needs

MUMBAI – The inter-bank call money rate opened at the Reserve Bank of India's repo rate of 6.00% Wednesday with increased demand for funds. "Demand in the money market will be more today (Wednesday) due to month-end and fortnightly requirements and tomorrow (Thursday) is a holiday," a dealer at a public sector bank said. Indian financial markets are shut on Thursday on account of Maharashtra Day and Labor Day. 

The two-day call money rate opened at 6.00% and the weighted average rate was also at the same level. Market participants see money market rates cooling off during the day, when demand reduces in the second half of the day. During the day, call money rates will hover around 5.80-6.00%, according to a dealer. The dealer said inflows from the government's month-end spending would come into the banking system on Wednesday, which will boost liquidity further.   

The RBI net absorbed INR 806.44 billion from the banking system on Tuesday, down from INR 903.39 billion Monday. The cash parked by banks at the RBI's Standing Deposit Facility fell slightly to INR 1.22 trillion on Tuesday from INR 1.33 trillion Monday. 

"There is a delay in (the government's month-end spending) inflows, which is surprising for us as well, and that is why rates are at repo," a dealer at a state-owned bank said. "We were expecting inflows to start from this week but it's already end of month and there has been no reflection in the liquidity."

RBI announced it would conduct a two-day variable rate repo auction of INR 500 billion Wednesday. "I expect a marginal increase in demand for Wednesday's auction due to high rates in the money market," a dealer from another state-owned bank said. The auction is expected to get bids of around INR 250 billion, down from the notified amount of INR 500 billion, according to an Informist poll. Some market participants expect the central bank to announce another variable rate repo auction if the total bids exceed the notified quantum. Daily variable rate repo auctions since mid-April have received low response from market participants due to lack of fund requirements and low rates in the money market. (Christina Titus)

End

Edited by Avishek Dutta

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.