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Informist, Monday, Jun. 2, 2025

By Srijita Bose

MUMBAI – The inter-bank call money rate ended below the Reserve Bank of India's repo rate of 6.00% Monday. The weighted average money market rates also remained below the repo rate on account of ample funds in the banking system, dealers said.

The one-day call money rate closed at 5.45% Monday, lower than 5.50% on two-day loans on Saturday. The weighted average call rate was 5.79% against 5.52% on Saturday. The triparty repo rate, where mutual funds are major lenders, also closed at 5.45%. The weighted average triparty repo rate was 5.66%, against 5.54% Saturday.

On Sunday, the banking system liquidity surplus, as reflected from the RBI's net absorption of funds from the banking system, was INR 2.32 trillion. Inflows from the government's month-end spending boosted liquidity in the banking system, thus keeping rates near the RBI's Standing Deposit Facility rate through most of the day, dealers said. 

"There are no triggers now and today (Monday), we did not see much borrowing demand from mutual funds also," a dealer at a state-owned bank said. "Liquidity is expected to stay above INR 2 trillion going into the MPC (Monetary Policy Committee) meeting and then everyone will see if there is a surprise on liquidity from them (the RBI)." 

At Friday's outcome of the RBI's Monetary Policy Committee meeting, traders widely expect a 25-basis-point rate cut. While some traders earlier expected the possibility of a 50 bps cut by the panel in June, a higher GDP print of 7.4% for Jan-Mar has erased such hopes. Some traders expect the RBI to widen the Liquidity Adjustment Facility corridor by another 25 bps on each end of the band from current 25 bps on either side of the band, while others expect the RBI to announce more government bond purchases through open market operation auctions or a cut in the cash reserve ratio of banks.

At the RBI's daily variable rate repo auction, banks and primary dealers borrowed INR 51.50 billion, lower than INR 87.21 billion borrowed on Friday. Banks also borrowed in the triparty repo market to meet their cash requirement after making payment for Friday's bond auction of INR 360 billion, dealers said. 

OUTLOOK

* On Tuesday, the one-day call rate will likely open below the RBI's repo rate of 6.00% on comfortable liquidity.

* During the day, the call rate is seen in a range of 5.40-5.85% and the triparty repo rate in a range of 5.35-5.80%.

* RBI will hold an overnight variable rate repo auction for INR 250.00 billion at 1000-1030 IST.

CALL RATE

5.45%--Monday's close for one-day loans

5.83%--Monday open for one-day loans

5.50%--Saturday's close for two-day loans

BENCHMARK MIBOR (in %)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: Below repo rate on liquidity flush from govt's month-end spends

MUMBAI – The inter-bank call money rate was below the Reserve Bank of India's repo rate of 6.00% on Monday. Improved liquidity in the banking system after inflows from the government's month-end spending are expected to keep rates lower than the repo rate during the day, dealers said. 

The one-day call money rate opened at 5.83% Monday and, at 0955 IST, the weighted average call rate was 5.84%. The triparty repo rate, where mutual funds are major lenders, opened at 5.70%, and the weighted average triparty repo rate was also the same as of 0955 IST. 

"There is comfort as liquidity crossed the INR 2 trillion mark, it is expected to have risen to around INR 2.5 trillion or so due to government's month-end spending," a dealer at a private sector bank said. 

On Friday, the RBI had net absorbed INR 2.10 trillion from the banking system, higher than the INR 1.80 trillion Thursday, central bank data showed. Banks parked INR 2.29 trillion with the RBI at the Standing Deposit Facility rate on Friday, higher than the INR 2.19 trillion on Thursday. 

Meanwhile, some dealers said the triparty repo rate could inch up during the day due to demand from mutual funds amid their redemption pressures. "Rates could go up to in TREPs around 1300 IST as mutual funds usually come around that time to borrow, and because of their cash needs they can borrow at higher rates also," a dealer at another private sector bank said.

At the RBI's variable rate repo auction, primary dealers are expected to borrow most of the INR 250 billion notified quantum, dealers said. Banks and primary dealerships are likely to bid around INR 50 billion at the overnight auction, lower than the INR 87.21 billion bids received at auction Friday, and the cut-off rate is estimated at 6.01%, according to an Informist poll.  (Srijita Bose)

End

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

Edited by Tanima Banerjee

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