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Informist, Friday, May 2, 2025

By Christina Titus

MUMBAI – The inter-bank call money rate for three-day loans closed at 5.85% Friday after ending at the Reserve Bank of India's repo rate of 6.0% for the past two consecutive days. The money market rates eased Friday due to comfortable liquidity in the banking system, dealers said. The liquidity surplus has returned to INR 1 trillion after being under pressure on account of a delay in the inflows from the government's month-end spending. 

The weighted average call rate was 5.90%. Trade volume for the three-day loans was INR 148.15 billion Friday, down from INR 179.91 billion Wednesday. Total money market volume, including tri-party repos, was INR 6.03 trillion Friday. "There was some demand during the day due to reporting Friday requirements," a dealer at a state-owned bank said.  

The RBI net absorbed INR 1.25 trillion from the banking system on Thursday, marginally down from INR 1.29 trillion Wednesday. The figure on Friday was higher than INR 806.44 billion of surplus on Tuesday. The cash parked by banks at the RBI's Standing Deposit Facility rose to INR 1.82 trillion Thursday, up from INR 1.79 trillion Wednesday. The liquidity surplus figure did not reach the market expectation of around INR 2 trillion by the end of April, dealers said. 

"I think inflows (month-end spending) will continue for 1–2 days," a market participant said. "Around INR 1 trillion has come into the system already and I expect INR 500 billion more to come, which will happen in the next week."  

The three-day variable rate repo auction received bids of INR 62.31 billion, lower than the notified amount of INR 250 billion. The 14-day variable rate repo auction also received a tepid response from the market participants despite being conducted after a while. The auction got bids of INR 1.49 billion, sharply lower than the notified amount of INR 250.00 billion. The RBI conducted a 14-day variable rate repo auction last on Mar. 7. "RBI is conducting daily VRR(variable rate repo) auctions. Everyone has an assurance of the availability of funds when required. So no need to go for 14-day VRR," another state-owned dealer said.   

OUTLOOK

* Monday, the one-day call rate may open below the RBI's repo rate due to comfortable liquidity, dealers said.

* During the day, the call rate is seen at 5.50-6.00% and the tri-party repo rate at 5.50-5.90%.

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

CALL RATE

5.85%--Friday close for three-day loans

5.90%---Friday open for three-day loans

6.00%--Wednesday close for two-day loans

BENCHMARK MIBOR (in %)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: Below repo rate; demand at 3-day, 14-day VRR auctions seen tepid

MUMBAI – The inter-bank call money rate opened below the Reserve Bank of India's repo rate of 6.00% Friday due to comfortable liquidity, dealers said. "There was not much demand in the early trade," a dealer from a state-owned bank said. "However, I expect demand to pick up after 1100 IST–1200 IST due to reporting Friday requirements. Call rate may go to 6.0-6.05% in day and then cool off to 5.75% level when the demand reduces." 

The three-day call money rate opened at 5.90% on Friday and the weighted average rate was also at the same level. At 0930 IST, the call rate was 5.95%. 

The RBI net absorbed INR 1.29 trillion from the banking system on Wednesday, up from INR 806.44 billion Tuesday. The cash parked by banks at the RBI's Standing Deposit Facility rose to INR 1.79 trillion on Wednesday from INR 1.22 trillion on Tuesday. "Though this is quite good liquidity, there should be more surplus, considering the expected inflows from government's month-end spending of INR 1.8 trillion," a dealer at a private sector bank said.  

After market hours Wednesday, the RBI announced 14-day variable rate repo auction for INR 250 billion along with the daily auction. The central bank has not conducted the 14-day variable rate repo auction since Mar. 7, citing a review of current and evolving liquidity conditions in each subsequent fortnight. "RBI wants overnight rates to be in certain range, which is why they came with 14-day VRR," the private bank dealer said. Money markets were under slight pressure for the past two days due to delayed government spending and fear of escalation of cross-border tensions, dealers said. 

However, dealers do not expect much participation in the 14-day auction due to comfortable systemic liquitity and added that primary dealers are likely to participate aggressively as they need funds. Demand at the three-day variable rate repo auction Friday is expected to be low, with borrowers expected to bid for just INR 100 billion, lower than the notified amount of INR 250 billion, according to an Informist poll.  (Christina Titus)  

End

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

Edited by Akul Nishant Akhoury

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