More Stories

Informist, Tuesday, May 20, 2025

By Christina Titus 

MUMBAI – The inter-bank call money market rate ended below the Reserve Bank of India's Standing Deposit Facility rate of 5.75% on ample liquidity in the banking system. The weighted average call money rate closed at 5.79%, the same as Monday, as no fresh borrowing requirement arose Tuesday, dealers said. 

The one-day call money rate closed at 5.45% Tuesday and moved in the range of 4.85-5.85%. The triparty repo rate, where mutual funds are major lenders, closed at 5.66%. Trade volume in the overnight call market was INR 167.34 billion, slightly up from INR 151.36 billion Monday. Total money market volume, including triparty repos, was INR 5.72 trillion Tuesday.

Market participants expect a slight increase in demand for funds Wednesday due to outflows on account of payments for the goods and services tax. "Most of the payments for GST (Goods and Services Tax) will happen on 21st (Wednesday)," a dealer at a state-owned bank said. "Around 30-40% of the outflows has gone out of the system today (Tuesday). The outflows are managable as the system has enough surplus liquidity currently." Dealers estimated the tax outflows to be in the range of INR 1.5 trillion-INR 2.0 trillion. 

On Monday, the RBI net absorbed INR 1.94 trillion from the banking system, down from INR 2.12 trillion Sunday. Banks had parked INR 2.34 trillion at the Standing Deposit Facility, up from INR 1.76 trillion Sunday. Systemic liquidity fell below the INR 2 trillion mark Monday after remaining high for four consecutive days.

Market participants await the outcome of RBI's meeting with banks on liquidity management framework which is likely on Wednesday. "We are not expecting any OMOs (open market operations) further as system has comfortable liquidity in the banking system," the private sector bank dealer said. "Plus, liquidity will improve further with the RBI's dividend." Dealers expect the RBI's surplus transfer to the government to be around INR 3 trillion, which is likely to be announced later this week. 

Owing to lack of fund requirements, the daily variable rate repo auction continued to receive weak response from the market. The auction Tuesday received bids worth INR 46.17 billion, far below the notified amount of INR 250 billion. Dealers are of the view that RBI may discontinue daily variable rate repo auction after its surplus transfer to the government. 

OUTLOOK

* On Wednesday, the one-day call money rate may open below the RBI's repo rate of 6.00% on ample liquidity.

* During the day, the call rate is seen in a range of 5.60-6.00%, dealers said.

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

CALL RATE

5.45%--Tuesday close for one-day loans

5.85%--Tuesday open for one-day loans

5.40%--Monday close for one-day loans

BENCHMARK MIBOR (in %)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: Opens below repo rate; liquidity surplus falls below INR 2 tln

MUMBAI – The inter-bank call money rate opened below the Reserve Bank of India's repo rate of 6.0% on Tuesday on account of comfortable liquidity in the banking system, dealers said. Market participants expect demand in the overnight money market to be low as there are no significant outflows scheduled during the day. Payment for Goods and Services Tax is expected to commence from Wednesday and traders estimate the outflow to be in range of INR 1.5 trillion to INR 2.0 trillion.

"Demand is very little in the first quarter usually, and it will pick up in mid-June when the banks start disbursing loans," a dealer at a private sector bank said. "Even if demand picks up, there will not be any spike in rates given the systemic liquidity remains around INR 1.5 trillion level. The RBI will support the banking system with its consistent liquidity measures, preventing rates from rising."

The one-day call money market rate opened at 5.85% Tuesday and the weighted average rate was 5.85%. The larger tri-party repo rate, where mutual funds are major lenders, opened at 5.66%. Dealers see the call rate hover around 5.85% and tri-party repos rate at 5.70% during the day. 

On Monday, the RBI had net absorbed INR 1.94 trillion from the banking system, down from INR 2.12 trillion Sunday. Banks had parked INR 2.34 trillion with the RBI at the Standing Deposit Facility, up from INR 1.76 trillion Sunday. Systemic liquidity fell below the INR 2 trillion mark Monday after remaining high for four consecutive days. Market participants await the outcome of RBI's meeting Wednesday with banks to discuss the liquidity management framework. They also await the central bank's surplus transfer to the government which is expected to be announced later this week.

Meanwhile, the RBI's daily variable rate repo auctions continue to receive fewer bids. For the overnight auction Tuesday, dealers expect bids worth INR 50 billion, much lower than the notified amount of INR 250 billion. According to dealers, primary dealers are likely the major participants at the auction.

Considering the upcoming tax outflows, the auction on Wednesday will likely see some demand, dealers said. A few dealers are of the view that the RBI may even increase the quantum for variable rate repo auction to help manage the outflows.  (Christina Titus)

End

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

Edited by Akul Nishant Akhoury

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.