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Informist, Thursday, Jun. 26, 2025

By Kabir Sharma

MUMBAI – The interbank call money rate ended below the Reserve Bank of India's repo rate on Thursday as liquidity in the banking system remained comfortable, dealers said. By the end of trade on Thursday, RBI's decision to conduct a variable rate reverse repo auction on Friday was factored in the rates, they said. 

"The VRRR is already factored in and it won't have much impact on market rates tomorrow," a dealer at a state-owned bank said. "Government spending will start on Monday and that will counter it all anyway," the dealer said. 

The one-day call money rate closed at 5.30%, unchanged from Wednesday's close. The weighted average call rate was 5.27%, slightly lower from 5.29% on Wednesday. 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 5.00-5.26% and closed at 5.05%. In the larger tri-party repo market, mutual funds were the major lenders on Thursday, dealers said. The weighted average tri-party repo rate ended at 5.25%, unchanged from Wednesday's close. 

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 2.48 trillion Wednesday, slightly lower from INR 2.59 trillion on Tuesday. Dealers said the impact of the reverse repo auction on Friday will be offset by an inflow of a similar amount on account of government spending on Monday. 

Post market hours on Tuesday, RBI had announced that it will conduct a variable rate reverse repo auction on Friday for INR 1 trillion. 

Dealers also said that the extension of money market operating hours may lead to a slight increase in the volume. The RBI has extended the call money market timing to 1900 IST starting Jul. 1, the central bank said Wednesday. The timing for tri-party repo and market repo has also been extended to 1600 IST, effective Aug. 1, the central bank said.

OUTLOOK

* On Friday, the three-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%--Thursday's close for one-day loans

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

5.30%--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, lack of major outflows

MUMBAI – The interbank call money rate opened unchanged against Wednesday's close and was below the Reserve Bank of India's repo rate of 5.50% on Thursday as banks have surplus liquidity, dealers said. The requirement for funds was also low due to absence of any significant outflows for the day, and this kept money market rates at similar levels from Wednesday, they added.

The one-day call money rate opened at 5.30% Thursday and, at 1015 IST, the weighted average call rate was at 5.30%. The triparty repo rate, where mutual funds are major lenders, opened at 5.22%, slightly below the RBI's Standing Deposit Facility rate of 5.25%. At 1015 IST, the triparty repo rate was at 5.25%, with the weighted average triparty repo rate at 5.24%. 

Money market rates are expected to remain below the repo rate for the rest of the day due to absence of any significant outflows, dealers said. Further, market participants expect the money market rates to see no major impact during the day from the variable rate reverse repo auction announced by the central bank on Tuesday, dealers said. "Banks have surplus liquidity to meet their funding needs due to the absence of any significant outflows, because whatever demand is coming from borrowing side it is getting fulfilled, therefore we see money market rates to remain steady and below the repo rate for the rest of the day," a dealer at a private sector bank said.

Post market hours on Tuesday, RBI had announced that it will conduct a variable rate reverse repo auction 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. "I don't expect a major impact on money market rates today (Thursday) due to the RBI's VRRR auction announcement, but overnight rates might rise on Friday based on demand seen during the auction," a dealer at a private sector bank said.

Dealers expect a slight rise in money market rates on Friday following the variable rate reverse repo auction. "We may see some change in money market rates post-VRRR auction Friday, likely after 1030 IST. Of course, there will be some impact on the money market rates potentially rising to around 5.50%. I think there will be a full subscription in the auction. TREPs (tri-party repo rate) can move between 5.35% to 5.45%, and the call rate might open above the repo rate, around 5.55%," a dealer at a private sector bank said.

There were outflows of INR 272 billion on Wednesday due to payment for the state government securities auction conducted on Tuesday. "Apart from this, there were no significant inflows or outflows on Wednesday, which kept the liquidity profile relatively stable," the dealer quoted above 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 2.48 trillion Wednesday, slightly lower from INR 2.59 trillion on Tuesday.  (Vaishali Tyagi)

End

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

Edited by Deepshikha Bhardwaj

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