More Stories

Informist, Tuesday, May 13, 2025

By Cassandra Carvalho

MUMBAI – The inter-bank one-day call money rate ended below the Reserve Bank of India's Standing Deposit Facility rate of 5.75% Tuesday amid low demand for funds. The triparty repo rate also ended below the SDF rate.

The one-day call money rate closed at 5.45% Tuesday and the weighted average rate was 5.83%. The call rate moved in the range of 4.90-5.90%. Trade volume for the one-day call was INR 160.43 billion, up from INR 148.22 billion for four-day loans Friday. Total money market volume, including tri-party repos, was INR 5.87 trillion Tuesday, down from INR 6.05 trillion Friday. Money markets were shut Monday for Buddha Purnima.

Both the call money and triparty repo rates were below 6.00% during the day. The triparty repo rate hit a low of 5.00%, while the day's low for the call money rate was 4.90%. Comfortable liquidity in the banking system led to a fall in rates Tuesday. On Monday, the RBI had net absorbed INR 1.67 trillion from the banking system, slightly lower than INR 1.73 trillion on Sunday. Banks' cash balance with the central bank increased slightly to INR 9.31 trillion Monday from INR 9.30 trillion Sunday.

"TREPS is at 5.00%, call is also around 5.50% but these trades are in low volumes, most of the trade is in the 5.75-5.85% range," a dealer at a state-owned bank said. "The last few trades which are in the low range must be the mutual funds or the cooperative banks who lend with whatever excess they have."

Mutual funds, which were largely on the sidelines last week, were seen lending Tuesday, dealers said. Small finance banks and primary dealerships continued to be the major borrowers in money markets, as seen last week, dealers said. 

On Tuesday, there were inflows of INR 250 billion due to the open market operations auction purchases of gilts Friday by the RBI. This likely offset the outflows of INR 320 billion for payments on gilts due the same day, dealers said. Other inflows were coupon payments on state bonds, the 7.25%, 2028 green bond, and the 7.32%, 2030 gilt. Some state bonds were redeemed, but the quantum was nominal. 

Rates in the special repo segment of the Clearcorp Repo Order Matching System were also at or below the RBI's repo rate of 6.00%. The weighted average rate on the benchmark 10-year 6.79%, 2034 gilt was 2.75%; it had hit a low of 0.01% in the session. This was likely due to traders taking short positions on the paper, dealers said. 

Additionally, dealers said the central bank's currency management operations could see a nominal reduction in systemic liquidity. The central bank sold dollars worth $1 billion-$2 billion in the spot market Friday as the rupee fell sharply that day to a low of 85.3225 against the dollar. A minor outflow is likely Tuesday or Wednesday due to the settlement of that intervention, dealers said. "Some FX transactions will also impact the liquidity. The RBI bought dollars when rupee was falling last week, so that settlement could be there," a dealer at a private bank said.

OUTLOOK

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

* During the day, the call rate is seen at 5.50-5.95% and the tri-party repo rate at 5.50-5.90%. 

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

CALL RATE

5.45%-–Tuesday's close for one-day loans

5.90%--Tuesday's open for one-day loans

5.85%-–Friday's close for four-day loans

BENCHMARK MIBOR (in %)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: Below RBI's repo as net absorbed liquidity rises; rates seen low

MUMBAI – The inter-bank call money market rate opened below the Reserve Bank of India's repo rate of 6.00% as net absorbed liquidity rose slightly, dealers said. Money market rates are expected to remain on the lower end of the recent range, as more participants are deploying funds in markets after India and Pakistan agreed to a ceasefire Saturday, they said. "Mutual funds were not aggressive (in the previous week), they were sitting on cash piles on Thursday and Friday," a dealer at a state-owned bank said. "Some mutual funds were on the borrowing side also, but today (Tuesday) as far as I can see right now, they're back to deploying funds." 

The one-day call money rate opened at 5.90% Tuesday, for the fourth straight day, against 5.85%, the close for four-day loans on Friday. The weighted average rate was the same. Rates in the call money market are expected to be in the range of 5.85-5.95% during the day, and those in the triparty repo market are seen at 5.75-5.90%.

Mutual funds who were largely on the sidelines in the previous week are expected to be on the lending side Tuesday. "Because of the war-like situation between India and Pakistan, mutual funds were not participating aggressively in the money markets," a dealer at a state-owned bank said. "In situations like these, they would prefer going for higher return investments." However, after US President Donald Trump announced that India and Pakistan had agreed to a "full and immediate ceasefire" Saturday, market participants expect mutual funds to lend in the triparty repo market, dealers said. 

On Friday, the RBI had net absorbed INR 1.71 trillion from the banking system, higher than INR 1.33 trillion on Thursday. Banks' cash balance with the central bank decreased to INR 9.32 trillion Friday from INR 9.57 trillion Thursday, which likely contributed to the increase in liquidity, dealers said. 

During the day, scheduled outflows of INR 320 billion for payments on gilts at Friday's auction are likely to be partially offset by settlement of the RBI's INR-250-billion open market purchase of gilts Friday. The central bank held a variable-rate repo auction of INR 250 billion at 1000-1030 IST. Subscription is expected to be around INR 50 billion, with major participation expected from primary dealerships, dealers said.  End

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

Edited by Tanima Banerjee

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.