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Informist, Friday, Jun. 20, 2025

By Vaishali Tyagi and Siddhi Chauhan

MUMBAI – The interbank call money rate ended below the Reserve Bank of India's repo rate of 5.50% on Friday as liquidity in the banking system was above INR 3 trillion, dealers said. Outflows for goods and services tax pushed weighted average call and tri-party repo rate above the previous day's close, dealers said. "Yes the weighted average rates for both call and TREPs (tri-party repo market) have risen slightly but it won't rise above the repo rate," a dealer at a private sector bank said. "The impact, I feel, is still muted because most banks had enough funds with them."

The three-day call money rate closed at 5.30%, against 4.90% on Thursday for one-day loans. The weighted average call rate was 5.28%. During the day, the call rate moved in the range of 4.80-5.35%. The tri-party repo rate moved in a range of 5.20-5.30% and closed at 5.30%. The trade volume in the overnight call money market was INR 165.65 billion, higher than INR 141.74 billion Thursday. The total money market volume, including tri-party repos, was INR 5.88 trillion, slightly lower than INR 5.97 trillion Thursday.

"Today (Friday) only one-fourth of GST outflows were done, the remaining will be done tomorrow," a dealer at a large state-owned bank said. "Even on Saturday, I don't see these outflows impacting rates drastically because the liquidity is quite comfortable. After these outflows are done, I think, we will still have around INR 1.5 trillion surplus in the system, which is quite comfortable." Apart from the GST outflows, there were no other major inflows or outflows on Friday, dealers said.

Tri-party repo rates also rose as banks borrowed from the market in order to earn a spread by parking funds under Standing Deposit Facility, dealers said. On Friday, tri-party repo rate touched a low of 5.20%. "Even though the spread is not that good, some banks are still doing spread trade, which is also pulling the rates up," a dealer at a private-sector said.

Most of the market participants expect the liquidity surplus to remain slightly above INR 1 trillion after the outflows for goods and services tax are done, dealers said. As per latest data from the RBI, the net liquidity absorbed by the central bank--a proxy for systemic liquidity surplus--stood at INR 3.14 trillion on Thursday, up from INR 2.87 trillion Wednesday. Market participants attributed the rise in surplus to banks reducing their cash balances maintained with the RBI. As per the latest RBI data, funds maintained by banks with the central bank on Thursday stood at INR 9.46 trillion, down from INR 9.61 trillion on Wednesday. 

Next week is expected to be slightly tight for money market rates, with the call rate expected to be around the repo rate of 5.50% and the triparty repo rates seen near 5.40%, dealers said. High credit offtake around the quarter-end will put pressure on rates next week, dealers said.

OUTLOOK

* On Saturday, the two-day call rate is likely to open below the RBI's repo rate.

* Outflows for goods and service tax may push volumes higher than usual. Generally, on working Saturdays, the volumes are low as banks meet their requirement for funds the previous day.

* During the day, the call rate is seen in a range of 4.80-5.35% and the tri-party repo rate in a range of 4.70-5.25%.

CALL RATE

5.30%--Friday's close for three-day loans

5.30%--Friday's open for three-day loans

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

BENCHMARK MIBOR (in %)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: Below repo rate; GST outflows unlikely to impact money mkt rates

MUMBAI – The interbank call money rate opened below the Reserve Bank of India's repo rate of 5.50% Friday as system liquidity crossed the INR 3 trillion mark, dealers said. The first tranche of Goods and Services Tax outflows, likely to start during the day, may not have a significant impact on money market rates, they said. 

The three-day call money rate opened at 5.30% Friday, and at 1000 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 1000 IST, the triparty repo rate was at 5.23%. The weighted average triparty repo rate was also at 5.22% at the same time.

"Look at the surplus we have right now, because of such high surplus the market is quite comfortable," a dealer at a state-owned bank said. "We would have seen some panic if the liquidity would have been around INR 1 trillion, rates would have also risen. But today (Friday), I am not seeing the call rising above 5.35% and TREPs (tri-party repo) rates rising beyond 5.25%."

GST outflows are expected to be done within two days and are seen draining INR 1.5 trillion to INR 2 trillion, dealers said. Some market participants give an even higher estimate of INR 3 trillion, they said. "GST (goods and services tax) outflows will start from today (Friday). Since tomorrow is a working Saturday, the outflows should be done by then and we will be able to assess its impact on liquidity," a dealer at a private sector bank said. "I think outflows will be in the range of INR 2 trillion to INR 2.5 trillion."

As per the latest data from the RBI, the net liquidity absorbed by the central bank--a proxy for systemic liquidity surplus--stood at INR 3.14 trillion on Thursday, up from INR 2.87 trillion Wednesday. Market participants attributed the rise in surplus to banks reducing their cash balances maintained with the RBI. As per the latest RBI data, funds maintained by banks with the central bank on Thursday stood at INR 9.46 trillion, down from INR 9.61 trillion on Wednesday. 

The comfortable liquidity conditions were also evident from the INR 3.23 trillion of funds parked by banks under the Standing Deposit Facility window on Thursday, dealers said. On Wednesday, funds parked under SDF stood at INR 2.96 trillion, RBI data showed. "Yesterday (Thursday) many banks were borrowing through TREPs (tri-party repo) market with a view to earn a spread by parking it under SDF at 5.25%," a dealer at a private sector bank said. On Thursday, the triparty repo rate had hit a low of 5.14%. (Siddhi Chauhan)

End

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

Edited by Ashish Shirke

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