More Stories

Informist, Thursday, May 22, 2025

By Christina Titus 

MUMBAI – The inter-bank call money rate ended below the Reserve Bank of India's Standing Deposit Facility rate of 5.75% on Thursday. However, the volume in the call money market saw an uptick, owing to payments for goods and services tax, according to dealers. "Around 70% (of payments for goods and services tax) has gone out of the system already," a dealer at a state-owned bank said. "By tomorrow (Friday), entire outflows will get completed." Dealers estimated tax outflows in May to range from INR 1.5 trillion to INR 2.0 trillion. 

The one-day call money rate closed at 5.45% Thursday, slightly up from Wednesday's close of 5.40%. The weighted average rate was at 5.85%, up from 5.80% Wednesday. The triparty repo rate, where mutual funds are major lenders, closed at 5.67%. The weighted average triparty repo rate was 5.79%, up from 5.73% Wednesday. 

Trade volume in the overnight call market rose to INR 197.06 billion from INR 179.15 billion Wednesday. Total money market volume was INR 6.18 trillion, up from INR 5.86 trillion Wednesday. 

The weighted average overnight market rates were also slightly up from previous days on account of tax outflows, dealers said. "Until there is an inflow, rates will be slightly higher in the overnight money market," a dealer at a state-owned bank said. However, dealers do not anticipate the call money rate to breach the repo rate going ahead. 

"Primary dealers have excessively borrowed from the call market due to some demand for funds, which might have contributed to the high volume," a dealer at a private sector bank said. Apart from primary dealers, small finance banks and payment banks were likely on the borrowing side Thursday, dealers said. 

On Wednesday, the RBI had net absorbed INR 1.32 trillion from the banking system, down from INR 1.85 trillion Tuesday, the central bank data showed. Banks had parked INR 1.71 trillion with the RBI at the Standing Deposit Facility, down from INR 2.25 trillion Tuesday. Though the liquidity surplus has fallen, dealers do not consider it as a concern as they believe it will improve going ahead by virtue of the government's month-end spending and the RBI's surplus transfer. In addition, the RBI's daily variable rate repo auctions will support the systemic liquidity if required, dealers said. 

Market participants await the RBI's surplus transfer to the government, which is likely to be announced Friday. Dealers expect a record surplus transfer of around INR 3 trillion. In 2023-24 (Apr-Mar), the central bank released the surplus transfer of INR 2.1 trillion.

The daily variable rate repo auction continues to receive weak response from the market, with the auction on Thursday receiving bids worth INR 43.41 billion, far below the notified amount of INR 250 billion. 

OUTLOOK

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

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

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

CALL RATE

5.45%--Thursday close for one-day loans

5.90%--Thursday open for one-day loans

5.40%--Wednesday close for one-day loans

BENCHMARK MIBOR (in %)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call:Below repo rate; GST outflows weigh on systemic liquidity surplus

MUMBAI – The inter-bank call money rate was below the Reserve Bank of India's repo rate of 6.0% on Thursday. The systemic liquidity is on a downward trend due to payment for Goods and Services Tax, dealers said. However, the fall in liquidity surplus is not a concern for traders yet as they expect it to improve going ahead on the back of inflows from the RBI's surplus transfer to the government and month-end spending. 

On Wednesday, the RBI had net absorbed INR 1.32 trillion from the banking system, down from INR 1.85 trillion Tuesday, the central bank data showed. Banks had parked INR 1.71 trillion with the RBI at the Standing Deposit Facility, slightly down from INR 2.25 trillion Tuesday. 

The one-day call money market rate opened at 5.90% Thursday and the weighted average rate was also the same. The larger triparty repo rate, where mutual funds are major lenders, opened at 5.70%. "During the day, I expect the call rate to be in the range of 5.80-5.90% and TREPS (triparty repo) at 5.70-5.85%," a dealer at a private sector bank said. 

Outflows on account of payments for GST outflows will be mostly completed by Thursday, most dealers said. While a few of them are of the view that outflows will settle on Friday. 

"Rates (in call money and triparty repo market) may go a bit higher today (Thursday) due to a fall in liquidity surplus and GST (goods and services tax) outflows," a dealer at a state-owned bank said. "However, it will not reach the repo (rate) level."

Despite the tax outflows, the daily variable rate repo auction on Thursday will likely see weak demand, most dealers said. At the auction, dealers expect bids worth INR 50 billion, much lower than the notified amount of INR 250 billion, according to an Informist poll. However, two private sector banks which participated in the poll expect bids to be higher than INR 100 billion at Thursday's auction due to tax outflows and reduced surplus liquidity.  (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.