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Informist, Tuesday, Jun. 24, 2025

By Siddhi Chauhan and Kabir Sharma

MUMBAI – The interbank call money rate ended a tad above the Reserve Bank of India's Standing Deposit Facility rate on Tuesday as demand for funds remained low due to ample liquidity in the banking system, dealers said. "The market is expecting GST outflows to have drained INR 1.5 trillion but the impact on liquidity is not visible," a dealer at a state-owned bank said.

The one-day call money rate closed at 5.30%, against 5.25% on Monday. The weighted average call rate was 5.27%, unchanged from Monday. During the day, the call rate moved in the range of 4.75-5.35%. The tri-party repo rate moved in a range of 5.10-5.27% and closed at 5.27%. In the larger tri-party repo market, mutual funds were the major lenders on Tuesday, dealers said. The weighted average tri-party repo rate ended at 5.20% on Tuesday, slightly lower than 5.23% on Monday.  

Mid-month government spending in the form of government expenditure muted the impact of goods and services tax outflows resulting the liquidity surplus to be above 1% of net demand time liabilities Tuesday, dealers said. The abundant surplus despite significant outflows this month kept the money market rates near the Reserve Bank of India's Standing Deposit Facility of 5.25%. 

As per the latest data from the Reserve Bank of India, the net liquidity absorbed by the central bank--a proxy for systemic liquidity surplus--stood at INR 2.44 trillion Monday, largely unchanged from INR 2.46 trillion on Sunday. The net durable liquidity surplus as of May 30 stood at INR 5.85 trillion, the highest level since Aug. 1, 2022. 

The impact of these outflows were muted due to government expendtiture which likely added INR 800 billion into the banking system in the previous week, dealers said. The majority of the payment overlapped with the second tranche of goods and services tax outflows on Saturday, dealer said. These inflows were different from the month-end government spending which is expected to start from Friday, dealers said.

"Actually government expenditure inflows happened last week which was quite significant over the weekend," a dealer at a state-owned bank said. "Now that the government has received a good amount of surplus, the spending is also expected to pick up. We are not aware of the nature of this expenditure. The timing of these inflows overlapped with GST outflows." 

In the coming days, market participants see the surplus rising above INR 3 trillion on the back of inflows from government month-end spending, dealers said. These inflows which are likely to begin this week may add INR 1.5 trillion-INR 2.0 trillion to the banking system, dealers said. 
 

Post market hours Tuesday, the Reserve Bank of India announced a seven-day variable rate reverse repo operation of INR 1.0 trillion on Friday. This may drain some liquidity from the system, dealers said. This will be the first variable rate reverse repo auction since Nov. 29. 

OUTLOOK

* On Wednesday, the one-day call rate is likely to open below the RBI's repo rate on comfortable liquidity conditions.

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

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

5.25%--Monday's close for one-day loans

BENCHMARK MIBOR (in %)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: Opens below repo rate as liquidity surplus above 1% of NDTL

MUMBAI – The interbank call money rate opened below the Reserve Bank of India's repo rate of 5.50% Tuesday as liquidity surplus remained above 1% of net demand and time liabilities despite goods and services tax outflows, dealers said. Outflows for goods and services tax likely drained around INR 1.5 trillion-INR 2.0 trillion from the banking system over two days, they said. 

The one-day call money rate opened at 5.30% Tuesday and, at 1000 IST, the weighted average call rate was at 5.30% as well. 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 1000 IST, the triparty repo rate was at 5.22%, with the weighted average triparty repo rate at 5.23%. 

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 2.44 trillion Monday, largely unchanged from INR 2.46 trillion on Sunday. In the coming days, market participants see the surplus rising above INR 3 trillion on the back of inflows from government month-end spending, dealers said. These inflows which are likely to begin this week may add INR 1.5 trillion-INR 2.0 trillion to the banking system, dealers said. 

"The surplus is already above 1% of NDTL and the durable liquidity is also near INR 6 trillion even after GST outflows," a dealer at a state-owned bank said. "I feel that the (money market) rates are going to trade at the same level as yesterday (Monday). It seems that the RBI is deliberately keeping the liquidity comfortable untill credit offtake is done." 

Generally towards a quarter end, credit offtake is quite high exerting pressure on money market rates. However, this time, with banking system flush with liquidity, the triparty repo rate is trading broadlly near Standing Deposit Facility of 5.25% and call rate are usually below repo rate, dealers said. During the day, triparty repo rate is expected to trade in the range of 4.90-5.25%, while call money rates are seen in the range of 4.80-5.30%, dealers said. 

The rates are also not seen rising as some participants expect the credit offtake to be low compared to March quarter. "This time it appears that credit offtake is low. People are talking about it in the market but I feel that it will pick up during the time of inflows from government month-end spending," dealers said. (Siddhi Chauhan) End

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

Edited by Akul Nishant Akhoury

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