More Stories

Informist, Wednesday, Jun. 25, 2025

By Siddhi Chauhan

MUMBAI – The interbank call money rate ended below the Reserve Bank of India's repo rate of 5.50% Wednesday as abundant liquidity limited demand from most banks, dealers said. Weighted average money market rates ended 2 to 5 five basis points above Tuesday's closing level owing to central bank's variable rate reverse repo auction announcement, they said. 

The one-day call money rate closed at 5.30%, unchanged from Tuesday's close. The weighted average call rate was 5.29%, slightly up from 5.27% from Tuesday. 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 5.20-5.28% and closed at 5.28%. 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 5.25%, up from 5.20% on Tuesday. 

Post market hours on Tuesday, RBI had announced that it will conduct a variable rate reverse repo on Friday. This slight rise doesn't seem to be an end to market reaction to the announcement, dealers said. Overnight rates are expected to rise more on Friday on the basis of demand seen on the day of the auction, dealers said. 

"The likelihood of (money market) rates rising on Friday is quite high. First of all it is a reporting Friday, some banks who have met their CRR requirememt would borrow on that day," a dealer at a private sector bank said. "And then it is the second last day of quarter end, usually demand for funds are quite high towards the end of quarter." Due to all of these factors, market participants expect the call rate on Friday at or slightly above repo rate of 5.50%, dealers said. 

As per the prudential norms, in the fortnight ending this Friday, banks were required to maintain an average of INR 9.54 trillion. According to the RBI data, banks' cash balances with the central bank exceeded for five of the 11 days in this fortnight. As per the RBI data, cash balance maintained with the RBI on Tuesday was at INR 9.43 trillion, from INR 9.41 trillion on Monday. 

On the liquidity front, outflows of INR 272 billion for the payment of state government security auction took place Wednesday. The auction was conducted on Tuesday. Other than this, no other inflows or outflows occurred Wednesday, dealers said. 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 2.59 trillion, slightly higher from INR 2.44 trillion on Monday.

Going forward, 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. Some market participants pegged an even higher estimate of INR 2.5 trillion government month-end spending.

OUTLOOK

* On Thursday, 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 4.90-5.40% and the tri-party repo rate in a range of 4.80-5.30%.

CALL RATE

5.30%--Wednesday's close for one-day loans

5.32%--Wednesday's open for one-day loans

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

BENCHMARK MIBOR (in %)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: Below repo; VRRR auction announcement to impact rates slightly

MUMBAI – The interbank call money rate opened below the Reserve Bank of India's repo rate of 5.50% on Wednesday, driven by comfortable liquidity in the banking system and low demand from most banks, dealers said. Market participants expect the money market rates to see a slight impact of the variable rate reverse repo auction announced by the central bank on Tuesday, dealers said. 

The one-day call money rate opened at 5.32% Wednesday and, at 1020 IST, the weighted average call rate was at 5.33%. The triparty repo rate, where mutual funds are major lenders, opened at 5.27%, slightly above from RBI's Standing Deposit Facility rate of 5.25%. At 1020 IST, the triparty repo rate was at 5.25%, with the weighted average triparty repo rate at 5.24%.

"Yes we have seen a marginal impact of VRRR announcement on rates today (Wednesday). If you see both TREPs (tri-party repo rate) and call rates have risen by 1 to 2 bps (basis points)," a dealer at a state-owned bank said. "But this is the most rates will rise today (Wednesday). On Friday rates can rise more because it is a reporting Friday and then VRRR is also there." 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 will be the first variable rate reverse repo auction since Nov. 29. 

With the current liquidity surplus, the RBI announcing a variable rate reverse repo auction was imminent, but the timing of the announcement surprised the market, dealers said. "See, we were expecting a VRRR in July because the month is not outflow heavy and after government month spending, the surplus would have easily been above INR 2.5 trillon," a dealer at a private sector bank said. "But since both advance tax and GST outflows failed to drain a significant amount, the surplus would have crossed INR 2.5 trillion bringing the operating rates even below SDF (standing deposit facility rate of 5.25%). This made RBI come up with a VRRR."

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 2.59 trillion, slightly higher from INR 2.44 trillion on Monday. The comfortable liquidity was also visible as banks increased the funds parked under standing deposit facility which rose to INR 2.67 trillion on Tuesday from INR 2.52 trillion Monday. Traders attributed this rise in liquidity to mid-month government spending in the form of government expenditure, dealers said. 

"There were some inflows of government expenditure (on Tuesday). It is not easy to track them as we are not provided any data for that, but it can be see its impact on liquidity," a dealer at a private sector bank said. "In the previous week as well, we received inflows (on account of government expenditure) of around INR 800 billion."

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. Some market participants pegged an even higher estimate of INR 2.5 trillion government month-end spending. (Vaishali Tyagi and Siddhi Chauhan)

End

Edited by Akul Nishant Akhoury

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2025. All rights reserved.