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Informist, Thursday, Jun. 12, 2025

By Siddhi Chauhan

MUMBAI – The interbank call money rate ended below the Reserve Bank of India's Standing Deposit Facility rate of 5.25% Thursday, despite requirements from some banks ahead of the reporting Friday, dealers said. In the second half of trade, inflows from mutual funds dragged triparty repo rates down, which limited a rise in call money rates, they added. 

The one-day call money rate ended at 5.00% Thursday, unchanged from Wednesday. The weighted average call rate was at 5.29%, marginally down from 5.31% Wednesday, while the triparty repo rate ended at 4.92% against 5.17% on Wednesday. The weighted average rate in the larger tri-party repo market was 5.20%, unchanged from Wednesday.

"Today (Thursday), the money market rates, especially TREPs (triparty repo rate), were so haphazard. In the morning, it was near 5.30%, but in the afternoon, rates fell to 4.75% as mutual funds received some inflows," a dealer at a private sector bank said. "Since call market moves in tandem with the triparty repo market, a spillover effect was seen in that segment as well."

On Thursday, the day's low in the triparty market was at 4.75%, while the call market rates saw a low of 4.35%. "Primary dealers and some small banks were on the borrowing side in the call market. I am not sure who was willing to lend at such a low rate," a dealer at a state-owned bank said. "I would have never lent anyone below the SDF rate."

In early trade, money market rates were under pressure as some banks borrowed aggressively to fulfil their fortnightly requirements, dealers said. As per prudential norms, banks are required to maintain an average of INR 9.42 trillion in the fortnight ending this Friday. According to RBI data, the cash balance maintained by banks was above the required amount in four out of 12 days this fortnight. 

"Most of the banks would have maintained an excess surplus as a result, only small banks appear to be borrowing at this time to fulfil their fortnightly requirements," a dealer at a state-owned bank said. "Because most state-owned banks have excess funds with them, they either park it at SDF or maintain a higher cash balance from the start of a fortnight."

Market participants expect some pressure on money market rates Friday as they expect outflows for advance tax to start that day, dealers said. Some market participants expect the last tranche of advance tax outflows to take place on Monday, as Jun. 15 is a Sunday, dealers said. Usually, outflows for advance tax payments are completed by the 15th of the last month of the quarter. 

The impact of these outflows is expected to be muted as the government is scheduled to pay out over INR 800 billion on Jun. 15 for the maturity of the 5.22%, 2025 bond. On Wednesday, the RBI net absorbed INR 2.58 trillion, marginally lower than INR 2.62 trillion Tuesday, central bank data showed.

OUTLOOK

* On Friday, the three-day call rate is likely to open near the RBI's repo rate of 5.50%.

* During the day, the call rate is seen in a range of 5.00-5.60% and the triparty repo rate in a range of 4.95-5.45%.

CALL RATE

5.00%--Thursday's close for one-day loans

5.35%--Thursday's open for one-day loans

5.00%--Wednesday's close for one-day loans

BENCHMARK MIBOR (in %)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: Below RBI's repo rate; money market rates seen in upward trend

MUMBAI – The interbank call money rate was below the Reserve Bank of India's repo rate of 5.50% due to ample liquidity in the banking system, dealers said. Market participants expect money market rates to rise during the day due to fortnightly requirements and advance tax outflows, they said. 

The one-day call money rate opened at 5.35% Thursday and, at 0950 IST, the weighted average call rate was at 5.34%. The triparty repo rate, where mutual funds are major lenders, opened below the RBI's Standing Deposit Facility rate at 5.20%. At 0950 IST the triparty repo rate was at 5.26%, with the weighted average triparty repo rate at 5.23%.

"I think the (money market) rates are on an upward trend today (Thursday) because of fortnightly requirements. Outflows for advance tax will have be started from today itself because 15th is a holiday," a dealer at a state-owned bank said. As per RBI data, on Wednesday, the cash balance maintained by banks with the RBI was INR 9.31 trillion, unchanged from Tuesday. As per prudential norms, banks are required to maintain an average of INR 9.42 trillion in the fortnight ending this Friday. "Even though the rise won't be as sharp, I think that call rate might be in the range of 5.25-5.40%, while triparty repo rate will be in range of 5.15-5.30%," the dealer said.

Outflows for corporate advance tax payments, likely to start during the day, are expected to drain around INR 1.2 trillion-INR 1.5 trillion from the banking system, dealers said. Some market participants expect the last tranche of advance tax outflows to take place on Monday, as Jun. 15 is a Sunday, dealers said. Usually, outflows for advance tax payments are completed by the 15th of the month at the end of a quarter. 

The impact of these outflows is expected to be muted as the government will pay out over INR 800 billion, which will match the day of the advance tax outflows, for the maturity of the 5.22%, 2025 bond. On Wednesday, the RBI net absorbed INR 2.58 trillion, marginally lower than INR 2.62 trillion Tuesday, central bank data showed. The net liquidity absorbed fell due to outflows for payment of INR 183.30 billion towards the auction of state government securities. (Siddhi Chauhan) End

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

Edited by Saji George Titus

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