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Informist, Thursday, Jun. 19, 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 due to the absence of significant outflows amid comfortable liquidity, dealers said. Volumes in the money market were largely driven by quarter-end and credit off-take demands, they said. 

The one-day call money rate closed at 4.90%, down from 5.10% Wednesday. The weighted average call rate was 5.26%. The call rate moved in the range of 4.70-5.35%, while the tri-party repo rate moved in the range of 5.14-5.25%. The trade volume in the overnight call money market was INR 141.74 billion, down slightly from INR 150.58 billion Wednesday. The total money market volume, including tri-party repos, was INR 5.97 trillion, the same as Wednesday.

In the call market, primary dealers and some small finance banks were the major borrowers, while most banks were on the lending side, dealers said. Small finance banks were on the borrowing side due to credit offtake, which is quite high towards the end of the quarter, dealers said.

Long-term tenure in the term money market gained traction as some banks borrowed due to quarter-end requirements, dealers said. "If I am heading towards quarter end, I know rates are going to rise, so it is better for me to borrow right now through a longer tenure," a dealer at a private bank said. "Currently, even if I borrow through a 20-day tenure, I can get funds at 5.70%, which is not bad." 

Meanwhile, the tri-party repo market saw banks borrowing funds at 5.14%--the day's low--and parking it under the Standing Deposit Facility rate of 5.25% and earning a decent spread, dealers said. Mutual funds are the usual lenders in the collateralised market, dealers said.

No major inflows or outflows took place during the day, dealers said. Market participants expect liquidity to see some pressure on Friday due to the first tranche of goods and services tax outflows, dealers said. Goods and services tax outflows are expected to drain around INR 1.5 trillion to INR 2.0 trillion from the banking system, dealers said. A few market participants expect these outflows to drain up to INR 3 trillion from the system. Owing to these outflows, money market rates are expected to see a rise of at least five basis points, dealers said.

The RBI net absorbed liquidity of INR 2.87 trillion on Wednesday, slightly lower than 2.90 trillion Tuesday, data from the central bank showed. Funds parked under RBI's Standing Deposit Facility were at INR 2.96 trillion Wednesday, down from INR 3.00 trillion Tuesday.

OUTLOOK

* Friday, the three-day call rate is likely to open below the RBI's repo rate.

* During the day, the call rate is seen in a range of 4.80-5.45% and the tri-party repo rate in a range of 4.70-5.35%.

CALL RATE

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

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

5.10%--Wednesday's close for one-day loans

BENCHMARK MIBOR (in %)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: Below repo rate on ample liquidity; GST outflows to start Fri

MUMBAI – The interbank call money rate was below the Reserve Bank of India's repo rate of 5.50% Thursday due to low demand for funds amid ample liqudiity, dealers said. Owing to low demand for funds, call money rates are expected to trade in a range of 4.90-5.35%, while triparty repo rates are seen at 4.80-5.25%. 

Market anticipates it to be a quiet day in the call money market Thursday, with no significant outflows or inflows expected from the banking system. This is likely to keep trade volume subdued, dealers said. "We don't see any pressure in the money market as participants are comfortable with current liquidity levels and that's why there's not much movement in money market rates," a dealer at a private bank said. "We don't expect any major outflows or inflows during the day."

The one-day call money rate opened at 5.30% Thursday and, at 0950 IST, the weighted average call rate was also at the same level. The triparty repo rate, where mutual funds are major lenders, opened at 5.20%, below the RBI's Standing Deposit Facility rate of 5.25%. At 0950 IST, the triparty repo rate was at 5.20%. The weighted average triparty repo rate was also 5.19% at the same time.

Money market rates were sharply below the repo rate due to sufficient banking system liquidity, dealers said. On Wednesday, the net absorbed liquidity was at INR 2.87 trillion, slightly lower than 2.90 trillion Tuesday, data from RBI showed. Funds parked under RBI's Standing Deposit Facility were at INR 2.96 trillion Wednesday from INR 3.00 trillion Tuesday.

Traders expect very minuscule outflow for T-bills and negligible amount of inflow for coupon to take place during the day, dealers said. However, the focus is on upcoming goods and services tax-related outflows, which are set to begin from Friday. These outflows are expected to drain INR 1.5 trillion to INR 2 trillion, dealers said. A few outliers even expect these outflows to drain around INR 3 trillion from the banking system, dealers said. End

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

Edited by Saji George Titus

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