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Informist, Tuesday, Jun. 17, 2025 

MUMBAI – The overnight Mumbai Interbank Offered Rate was fixed at 5.30% on Tuesday, near the Reserve Bank of India's Standing Deposit Facility Rate of 5.25% and the lowest since Sep. 14, 2022, signalling comfortable liquidity conditions despite outflows for advance tax draining more than INR 1 trillion from the banking system, dealers said. The overnight MIBOR, the benchmark for the Indian call money market, fell to a 33-month low of 5.30% on Tuesday from 5.35% Monday. 

Outflows for advance tax, which were completed in two tranches over Friday and Monday, drained INR 1.25 trillion to INR 1.5 trillion from the banking system, dealers said. A few market participants expect these outflows to have amounted to INR 1.7 trillion. On Monday, the net absorbed liquidity was at INR 2.68 trillion, marginally lower than INR 2.80 trillion on Sunday. 

"Even after advance tax outflows, liquidity is so comfortable that there is hardly any demand in the market," a dealer at a state-owned bank said. "People who usually are on the borrowing side are also not borrowing today (Tuesday) because we have enough liquidity. This is keeping rates in both call and TREPs (triparty repo) market quite low."  

On Tuesday, the call money rate fell to the day's low of 4.90% and the weighted average call rate was 5.29% as of 1304 IST, slightly lower than 5.30% Monday. Meanwhile, the collaterised lending rate fell to the day's low of 5.18% and the weighted average triparty repo rate was at 5.22% at the same time.

"Advance tax should have hit the liquidity and rates a bit harder than we are seeing right now. But then, we should also take into account that INR 1 trillion of these outflows were offset by inflows received on Friday," a dealer at a private sector bank said. The impact of advance tax outflows was subdued due to inflows of INR 800 billion from the maturity of the 5.22%, 2025 bond and INR 257.44 billion from bonds bought back by the government, dealers said. The payment for these inflows coincided with the first tranche of advance tax outflows on Friday, dealers said. 

In the absence of significant outflows, money market rates are expected to remain near the Standing Deposit Facility rate of 5.25%, dealers said. In the coming days, pressure on money market rates is seen buiding up as the liquidity surplus is expected to fall due to goods and services tax outflows, dealers said. Outflows for good and services tax, likely to start from Friday, are expected to drain around INR 1.5 trillion to INR 2.0 trillion from the banking system, dealers said. 

"The low demand in the overnight market is visible by looking at the market volumes. I think the rates are expected to trade like this until GST (goods and services tax) outflows start," a dealer at a another state-owned bank said. "It is difficult to say how much of an impact is expected right now."  End

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

Reported by Siddhi Chauhan

Edited by Avishek Dutta

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