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Informist, Monday, Jun. 30, 2025

By Vidhushi RajPurohit

MUMBAI – Ample liquidity in the banking system and likely inflows from the governemnent's month-end spending led the the interbank call money rate to close at Reserve Bank of India's Standing Deposit Facility rate Monday, dealers said. In the early trading hours, the money market rates were high on account of banks' need for funds to meet the quarter-end credit disbursal needs, they said. Consequently, the weighted average call money rate also rose to 5.50%, from 5.38% Friday.

The one-day call money rate settled at 5.25%, up from 5.05% for three-day loans Friday. "Rates were slightly higher as it is quarter-end now and there was some credit disbursal needs from both public and private (sector) banks," a dealer at a state-owned bank said. 

In addition to credit disbursals, outflows for the payment of government bond auction held on Friday also led to an outflow of INR 360 billion. However, the liquidity in the banking system was adequate to absorb the outflows without causing additional strain, dealers said. Inflows from government's salary and pension payment also aided banks to alleviate the demand, they said.

Last week, inflows amounting to INR 300 billion had hit the banking system as month-end inflows and dealers expect the total inflows to be around INR 1.50 trillion to INR 1.75 trillion. Some dealers expect the inflows to be even higher and estimate the figure at around INR 2 trillion. 

"Our bank has received good inflows today (Monday) for month-end spending and this is higher than the usual amount," a dealer at a state-owned bank said. "On a systemic level, let's see what the figure will be tomorrow (Tuesday). This is the reason why rates had also come down in the second half."

On Sunday, RBI's net absorbed liquidity was INR 2.62 trillion, slightly higher than INR 2.59 trillion Saturday. As per the latest RBI data, funds parked under the Standing Deposit Facility was at INR 1.54 trillion Sunday, slightly up from INR 1.51 trillion Saturday. 

Owing to comfortable systemic liquidity, on Sunday banks maintained cash reserves of INR 9.79 trillion with the RBI. The amount was higher than INR 9.52 trillion which is the average daily cash reserve requirement for the fortnight that started on Saturday. 

OUTLOOK

* On Tuesday, the one-day call rate may open slightly below the RBI's repo rate due to comfortable liquidity and month-end inflows.

* During the day, the call rate is seen in a range of 4.90-5.50% and the tri-party repo rate in a range of 4.80-5.30%.

CALL RATE

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

5.50%--Monday's open for one-day loans

5.05%--Friday's close for three-day loans

BENCHMARK MIBOR (in %)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: Opens at repo rate on strong demand due to qtr-end requirements

MUMBAI – The inter-bank call money rate opened at the Reserve Bank of India's repo rate of 5.50%, and rose close to the RBI's Marginal Standing Facility rate of 5.75%, due to strong demand for funds from banks to meet reserve requirements early in the day, dealers said. Dealers expect moderation in demand later in the day due to ample liquidity in the banking system, which is expected to drive down money market rates, they said. Need for funds at the quarter-end also contributed to higher rates, as banks face internal requirements and significant disbursements. 

The one-day call money rate opened at 5.50% Monday and, at 0950 IST, the weighted average call rate was at 5.52%. The triparty repo rate, where mutual funds are major lenders, opened at 5.45%. At 0950 IST, the triparty repo rate was at 5.48%, with the weighted average triparty repo rate at 5.49%. 

"The TREPs (triparty repo) rate will come near to SDF (standing deposit facility) rate (5.25%), and eventually call rates will also come alomost 20 basis points down to near repo rate, from 5.70%," a dealer at a private sector bank said.

Dealers expect the call money rate to remain volatile in the morning due to quarter-end requirements, but anticipate rates to stabilise once banks meet their funding needs.

"This upward pressure on rates (money market rates) will remain for some time especially during early trade hours because of strong demand for funds to meet various requirements due to quarter-end, but we see rates settling down later in the day due to ample liqudity," a dealer at another private sector bank said.

On Friday, RBI's net absorbed liquidity was at INR 3.01 trillion, higher than INR 2.71 trillion Thursday. The comfortable liquidity was also visible, as on Friday banks increased the cash balance maintained with the RBI to INR 9.40 trillion from INR 9.36 trillion Thursday, data from the central bank showed. 

The increase in systemic liquidity was on account of inflows from the government's month-end expenditure, dealers said. "Month-end spending added more liquidity to the system, which will show effect on rates around 1400 IST," the dealer quoted above said. 

While there are some outflows Monday, dealers believe these will not significantly impact the overall liquidity situation and hence, rates will not rise above the repo rate. During the day, payment for the government bond auction held on Friday will lead to outflow of INR 360 billion from the banking system.  End

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

Edited by Akul Nishant Akhoury

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