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Informist, Friday, Jun. 13, 2025

By Siddhi Chauhan

MUMBAI – The interbank call money rate ended below the Standing Deposit Facility rate of 5.25% on Friday despite outflows for corporate advance tax and fortnight requirements, dealers said. "The rates (money market rates) didn't seem to be under pressure today even though outflows for advance tax were expected to take place," a dealer at a private bank said. "In the morning, demand from banks was visible as triparty repo rates rose above SDF rate (of 5.25%). But it was seen settling towards the second half."

The three-day call money rate ended at 5.00% Friday, unchanged from Thursday for one-day loans. The weighted average call rate settled at 5.31%, up from 5.29% Thursday. The triparty repo rate ended at 5.28% against 4.92% on Thursday. The weighted average rate in the larger tri-party repo market was 5.16%, down from 5.20% Thursday. 

"The rates have fallen sharply, weighted average TREPs (triparty repo rate) have come down to 5.16%," a dealer at a state-owned bank said. "Tax payments have started but the impact was not much because we have received around INR 800 billion from maturity (of 5.22% 2025 bond) and INR 250 billion has been added through buyback."

Market participants don't have a fair estimate of the advance tax outflows that took place during the day, but the total outflows for the same are expected to drain INR 1.2 trillion to INR 1.5 trillion in two tranches, dealers said. The remaining tranche for advance tax, which will take place on Monday, is unlikely to impact money market rates, dealers said. Early in the day, there were inflows of INR 800 billion into the banking system from the maturity of the 5.22%, 2025 bond and INR 257.44 billion from bonds bought back by the government on Thursday, dealers said.

Money market rates also fell as most banks had met their fund needs for the reporting Friday earlier in the fortnight, dealers said. "You are seeing how banks are maintaining excess funds at SDF because they have enough funds with them," a dealer at a state-owned bank said. "They are doing the same with cash balance as well, most banks maintain a higher cash balance at the start of the fortnight and they reduce it gradually towards the end." As per prudential norms, banks are required to maintain an average of INR 9.42 trillion in the fortnight ended Friday. In five of 13 days this fortnight, cash balance maintained by the banks was below the required average amount, RBI data showed.

On Thursday, the RBI net absorbed INR 2.76 trillion, marginally higher than INR 2.56 trillion Wednesday, central bank data showed. As per the data, the funds parked under Standing Deposit Facility on Thursday rose to INR 2.86 trillion, from INR 2.67 trillion Wednesday.

OUTLOOK

* Call market is shut on Saturday. On Monday, the one-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%--Friday's close for three-day loans

5.35%--Friday's open for three-day loans

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

BENCHMARK MIBOR (in %)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: Below repo; tax outlfows unlikely to pressurise money mkt rates

MUMBAI – The inter-bank call money market rate opened below the Reserve Bank of India's repo rate of 5.50% Friday due to sufficient liquidity in the banking system, dealers said. Despite outflows for advance tax scheduled during the day, money market rates are expected to remain largely unchanged. "I am not expecting a substantial rise in rates (money market rate)...maximum they could rise by 5 basis points," a dealer at a private bank said. "This is because outflows for advance tax will be largely offset by inflows from maturity of g-sec (5.22% 2025 bond)."

The three-day call money rate opened at 5.35% Friday and, at 1000 IST, the weighted average call rate was at 5.35%. The triparty repo rate, where mutual funds are major lenders, opened below the RBI's Standing Deposit Facility rate at 5.20%. At 1000 IST the triparty repo rate was at 5.25%, with the weighted average triparty repo rate at 5.20%.

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. 

On Thursday, the RBI net absorbed INR 2.76 trillion, marginally higher than INR 2.56 trillion Wednesday, central bank data showed. As per the data, the funds parked under Standing Deposit Facility on Thursday rose to INR 2.86 trillion, up from INR 2.67 trillion Wednesday. "The TREPS (tri-party repo rate) fell to 4.75% yesterday (Thursday), so dealers would have borrowed at cheaper rates from the treps market and parked at SDF," a dealer at a state-owned bank said. 

The RBI on Thursday announced that it will skip conducting 14-day variable rate repo auction on a review of the current liquidity conditions. The central bank's decision to skip the 14-day VRR came at a time when surplus liquidity in the banking system has averaged around INR 2.5 trillion in June, but is set to reduce sharply in the coming fortnight due to outflows for advance tax and goods and services tax payments. This may push the surplus to near neutral for the first time since late April.

The cancellation of 14-day operation did not seem to bother money market participants as they expect the current liquidity to be sufficient, dealers said. "Already, the rates are trading below SDF rate because of ample liquidity. The RBI wants operating rates to be near repo (rate)," the dealer quoted above said. (Siddhi Chauhan and Vaishali Tyagi) End

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

Edited by Ashish Shirke

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