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Informist, Wednesday, Jul. 2, 2025

By Siddhi Chauhan

MUMBAI – The interbank call money rate ended below the Reserve Bank of India's Standing Deposit Facility rate of 5.25% Wednesday due to no significant outflows amid abundant liquidity, dealers said. Weighted average money market rates for call and tri-party repo fell by 4-5 basis points Wednesday as banking system liquidity rose above the INR 3 trillion mark, they added. 

The one-day call money rate settled at 4.90% Wednesday, unchanged from Tuesday. The weighted average call rate was 5.27%, lower than 5.31% Tuesday. During the day, the call rate moved in the range of 4.70-5.35%. The tri-party repo rate, which touched an intraday high of 5.21%, closed at 5.10% Wednesday, up from 4.90% Tuesday. The weighted average tri-party repo rate ended at 5.14%, down from 5.19% Wednesday.

"We have a lot of funds available with us, and on top of that, we don't have any significant outflows scheduled at least for two days," a dealer at a state-owned bank said. "Obviously, rates will cool down because of that. Volumes are also low compared to yesterday because demand is not that much." 

The call money market volumes were INR 169.24 billion, broadly similar to INR 160.16 billion Tuesday. The overall market volumes were at INR 6.36 trillion, down from INR 6.78 trillion Tuesday. Volumes in the widely participated tri-party repo market were at INR 4.29 trillion, down from INR 4.61 trillion Tuesday. 

Some market participants expect a slight fall in money market rates this week due to a lack of significant outflows, dealers said. "We can see the weighted average call rates coming at SDF rate (Standing Deposit Facility rate of 5.25%) this week because there are no huge outflows," a dealer at a private sector bank said. "Excise duty outflows, which will probably happen on Friday, will drain just INR 500 billion. The amount is very less looking at the current liquidity." 

The RBI net absorbed INR 3.32 trillion from the banking system on Tuesday, higher than INR 2.62 trillion Monday. The ample surplus liquidity was also visible, as banks continued to maintain a higher cash balance with the RBI, which was at INR 10.07 trillion on Tuesday, data from the central bank showed. 

The next outflow for the banking system is tax deducted at source and excise duty, which will likely start towards the end of this week or the start of next week, dealers said. Traders pegged the quantum for these outflows at INR 200 billion to INR 600 billion, dealers said. 

Due to no significant stress expected on liquidity and the maturity of the seven-day variable rate reverse repo, some market participants expect the central bank to announce another auction on Friday. The reversal of the variable rate reverse repo auction held on Jun. 27, due on Friday, will amount to INR 849.75 billion worth of inflows. 

 "I think RBI will rollover the upcoming VRRR by announcing one on Friday likely of the same quantum and tenure," a dealer at a state-owned bank said. "The reason why I feel this is because already we are above INR 3 trillion (surplus), and the maturity will only add INR 800 billion into the system."

OUTLOOK

* On Thursday, the one-day call rate may open slightly below the RBI's repo rate due to comfortable liquidity.

* 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 4.80-5.25%.

CALL RATE

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

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

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

BENCHMARK MIBOR (in %)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: Near SDF rate as surplus liquidity widens post-month-end inflows

MUMBAI – As the second day of the extended 10-hour call money trading session unfolded Wednesday, the interbank call money rate was near the Reserve Bank of India's Standing Deposit Facility rate of 5.25% as demand for funds was significantly down post-inflows from the government's month-end spending, dealers said. Dealers do not expect any significant outflows for the day and which, in turn, will likely keep the money market rates on the lower side, below 5.30%, they said. 

The one-day call money rate opened at 5.30% Wednesday and, at 1000 IST, the weighted average call rate was also at the same level. The triparty repo market, where mutual funds are major lenders, opened at 5.21%, below the RBI's Standing Deposit Facility rate. At 0930 IST, the triparty repo rate was at 5.15%, with the weighted average triparty repo rate at 5.17%.  

Money market rates are expected to decline further due to comfortable liquidity conditions driven by inflows from the government's month-end spending. "For the day, the rates are going to be lower because liquidity is very comfortable because of month-end spending only, because before month-end spending liquidity was around INR 2.5 trillion, now it has become almost INR 3.8 trillion," a dealer at a private sector bank said. "There are no outflows or inflows I can see which will tamper liquidity, whatever periodical is there it will be there." 

Call money market dealers expressed mixed views on the impact of extended trading hours, which came into effect on Tuesday. Despite the extended hours, volumes remained relatively low. "We didn't see any significant impact from the extended hours on volumes, which were around INR 160 billion only. After 5 PM (1700 IST), there were hardly any borrowers in the market," the dealer quoted above said. "A few lenders with surplus funds were still quoting, but most participants, both borrowers and lenders, settle trades or meet their requirements within the traditional market hours, like till 1700 IST only."

Primary dealers also seem to be sticking to their usual routine, wrapping up their activities within the earlier timeframe, dealers said. "I did not see any primary dealers quoting their rates for borrowing after the usual hours. They seem to have internally maintained their earlier schedule," the dealer said.

On Tuesday, RBI's net absorbed liquidity was at INR 3.32 trillion, higher than INR 2.62 trillion Monday. The ample surplus liquidity was also visible, as banks continued to maintain a higher cash balance with the RBI, which was at INR 10.07 trillion on Tuesday, data from the central bank showed. 

Money market dealers expect no additional pressure on liquidity in the near term. Most dealers do not anticipate any variable rate reverse repo auctions soon, citing the pending reversal of the previous auction. The reversal of variable rate reverse repo auction held on Jun. 27 is due on Friday, which will amount to INR 849.75 billion worth of outflows. "I do not see any VRRR anytime soon, because Friday's auction payment is already pending," the dealer said. 

Edited by Saji George Titus

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