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Informist, Monday, Jun. 9, 2025

By Srijita Bose

MUMBAI – The interbank call money rate ended sharply below the Reserve Bank of India's Standing Deposit Facility of 5.25% on Monday. Rates fell due to low demand for funds amid comfortable liquidity, dealers said.

The one-day call money rate ended at 4.90%, down from 5.00% for three-day loans Friday. The weighted average rate also fell to 5.30% from 5.42% Friday. The triparty repo rate closed at 5.14%. The weighted average rate in the larger tri-party repo market was 5.20%, down from 5.29% Friday.

The narrowing of the spread between the call money market and triparty repo market post the 50 basis points rate cut resulted in slightly lower volumes, dealers said. The total money market volume was INR 5.76 trillion Monday, down from INR 6.07 trillion Friday. "There is not much demand for funds, and not much of a spread also to play with as TREPS rates (triparty repo) have also come down," a dealer at a private sector bank said. "Volumes are also a little less today (Monday), as outflows due to excise duty also seem to be over." 
 

On Sunday, the RBI had net absorbed INR 2.45 trillion, central bank data showed. Market participants expect outflows for excise duty to have drained around INR 400 billion to INR 500 billion from the banking system. With the outflows for excise duty completed, the next significant outflows will be corporate advance tax, which will likely begin this week, dealers said. Corporate advance tax outflows are expected to drain around INR 1.2 trillion to INR 1.7 trillion, dealers said. 

At the overnight variable rate repo auction held during the day, banks and primary dealers borrowed INR 37.11 billion against the notified amount of INR 250 billion. The RBI, in a release Monday after market hours, said it will discontinue the daily VRR auction from Wednesday. Traders had widely expected the RBI to stop VRR auctions. In June so far, the average daily borrowing by banks and primary dealers through the VRR auction was INR 43.07 billion. However, some traders now fear that further liquidity support from the RBI through other measures, such as open market operation auctions or dollar buy/sell swaps, could also be withdrawn, dealers said. 

OUTLOOK

* On Tuesday, the one-day call rate is likely to open below the RBI's repo rate of 5.50% on comfortable liquidity.

* During the day, the call rate is seen in a range of 4.90-5.50% and the triparty repo rate in a range of 4.80-5.30%.

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

CALL RATE

4.90%--Monday's close for one-day loans

5.40%--Monday's open for one-day loans

5.00%--Friday's close for three-day loans

BENCHMARK MIBOR (in %)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: Below RBI's repo rate on low demand for funds, ample liquidity

MUMBAI – The interbank call money rate was below the Reserve Bank of India's repo rate of 5.50% on Monday. Low demand for funds and comfortable liquidity is expected to keep rates from rising above the RBI's repo rate, dealers said. 

The one-day call money rate opened at 5.40% Monday and, at 0940 IST, the weighted average call rate was at 5.35%. The triparty repo rate, where mutual funds are major lenders, opened at the RBI's Standing Deposit Facility rate of 5.25% and inched below, pulling down the weighted average triparty repo rate to 5.22%.

"There is not much demand right now and rates could stay at these levels or could even inch down," a dealer at a primary dealership said. "There will be some demand from banks due to gilt payments, but levels should still be supported." Outflows worth INR 320 billion for payment of government securities are scheduled for Monday.

On Friday, the RBI had net absorbed INR 3.13 trillion, marginally higher than INR 3.03 trillion Thursday, central bank data showed. Outflows for excise duty did not drain liquidity significantly on Friday, dealers said. A part of the ouflows was also offset due to inflows from the government's INR 238-billion buyback auction last week, the payment for which was settled on Friday, they said. Some expect payments for excise duty to be made Monday, with the overall drain from payment for excise duty amounting to around INR 200 billion to INR 500 billion. 

At the INR 250-billion overnight variable rate repo auction, primary dealers and banks are expected to borrow less than 15% of the notified quantum of INR 250 billion, dealers said. Traders expect total bids at the auction to be around INR 32.5 billion, lower than the INR 35.5 billion of bids received at the daily VRR auction Friday, and the cut-off rate is estimated at 5.51%, according to an Informist poll.  (Srijita Bose)

End

Edited by Saji George Titus

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