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Informist, Tuesday, Jun. 17, 2025

By Vaishali Tyagi and Siddhi Chauhan

MUMBAI – The overnight call money rate ended sharply below the Standing Deposit Facility rate of 5.25% on Tuesday due to low demand from banks amid comfortable liquidity in the banking system, dealers said. Money market rates cooled due to low demand as no significant outflows were lined up for the day, they said. "There was not much pressure seen on the money market rates as there was not enough fund demand," a dealer at a private bank said.

The one-day call money rate closed at 4.95% Tuesday, with the weighted average call rate at 5.26%. The call rate moved in the range of 4.50-5.35%. The trade volume in the overnight call money market was INR 138.28 billion, slightly lower than INR 157.22 billion Monday. The total money market volume, including tri-party repos Tuesday, was INR 6.20 trillion, slightly lower than INR 6.16 trillion Monday. Meanwhile, the tri-party repo rate moved in a range of 5.01-5.25%, closing at 5.25%. Market participants said trading volume in the tri-party repo segment was subdued, with most significant activity concentrated in the early market hours.  

The low demand was evident as the call money market saw a low of 4.50%, while the day's low for the triparty repo market was 5.01%. Consequently, the overnight Mumbai Interbank Offered Rate fell to a 33-month low of 5.30% on Tuesday. Cooperative banks and state-owned banks were on the lending side, with primary dealers on the borrowing side in the call market. The call rate falling to the day's low was attributed to the activity of cooperative banks. "Some cooperative banks that have liquidity with them are eager to lend funds," a dealer at a private bank said. "They (cooperative banks) must have been the lender because the amount of the deal is small. "

On Monday, the net absorbed liquidity was at INR 2.68 trillion, marginally lower than INR 2.80 trillion on Sunday. While the impact of advance tax outflows was not visible on banking system liquidity, the cash balance maintained by banks with RBI fell to INR 9.57 trillion on Monday from INR 10.20 trillion on Sunday. 

Market participant expect no significant outflows for a day or two, which should keep liquidity pressures at bay. Corporate advance tax outflows drained INR 1.2 trillion-INR 1.5 trillion from the system in two tranches, with the major portion on Monday. "We don't anticipate any pressure on money market rates on Wednesday, as li    quidity surplus is expected to persist after the last tranche of advance tax," a dealer said. "Liquidity is not a concern for now and is likely to sustain for some time, with barely any significant outflows expected in a day or two." Dealers said liquidity got some comfort from coupon payments, with around INR 157 billion flowing into the system Tuesday.

OUTLOOK

* On Wednesday, the one-day call rate is likely to open below the RBI's standing deposit facility rate on low demand.

* During the day, the call rate is seen in a range of 4.80-5.40% and the triparty repo rate in a range of 4.60-5.30%.

CALL RATE

4.95%--Tuesday's close for one-day loans

5.30%--Tuesday's open for one-day loans

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

BENCHMARK MIBOR (in %)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: Below repo; absence of significant outflows to keep rates lower

MUMBAI – The inter-bank call money market rate opened below the Reserve Bank of India's repo rate of 5.50% Tuesday due to low demand for funds as the last tranche of advance tax outflows took place Monday, dealers said. Money market rates are likely to be below the repo rate as there is no pressure on the outflows front, they added. 

The one-day call money rate opened at 5.30% Tuesday and, at 1000 IST, the weighted average call rate was at 5.30%. The triparty repo rate, where mutual funds are major lenders, opened at 5.23%, below the RBI's Standing Deposit Facility rate of 5.25%. At 1024 IST, the triparty repo rate was at 5.24%, with the weighted average triparty repo rate at 5.23%.

On Monday, the net absorbed liquidity was at INR 2.68 trillion, marginally lower than INR 2.80 trillion on Sunday. While the impact of advance tax outflows was not visible on the banking system liquidity, the cash balance maintained by banks with RBI fell to INR 9.57 trillion on Monday from INR 10.20 trillion maintained on Sunday. 

"According to me, after the last tranche of advance tax outflows, the surplus should have fallen more sharply. However, we have not seen a large impact on liquidity," a dealer at a private bank said. "But the cash balance has fallen by more than INR 800 billion, maybe banks would have used those funds for outflows." On the whole, outflows for advance tax would have drained around INR 1.2 trillion-INR 1.5 trillion from the banking system, dealers said. 

On Monday, despite the last tranche of advance tax outflows, money market rates had fallen below the Standing Deposit Facility rate which enabled banks to borrow at cheaper rates and park funds at Standing Deposit Facility, dealers said. As a result, the funds parked under SDF on Monday rose to INR 2.78 trillion from INR 2.05 trillion Sunday.  End

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

Edited by Avishek Dutta

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