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Informist, Saturday, Jul. 5, 2025

By Siddhi Chauhan

MUMBAI – The two-day inter-bank call money rate ended below the Reserve Bank of India's Standing Deposit Facility rate of 5.25% Saturday due to low demand for funds from banks amid comfortable liquidity in the banking system, dealers said. Total trade volume in call money market fell to INR 15.36 billion with only 74 trades against INR 151.84 billion Friday. 

The two-day call money rate ended at 4.80% against 4.75% Friday for three-day loans. The weighted average call rate was at 4.91% Saturday, down from 5.29% Friday, while the weighted average rate in the larger tri-party repo market, which includes mutual funds, was at 4.87%.

In the coming week, outflows for tax deducted at source and excise duty are expected to drain around INR 200 billion to INR 600 billion from the banking system, dealers said.

However, these outflows are unlikely to have an impact on the abundant liquidity and money market rates, they added. As per the latest data from RBI's website, the net liquidity absorbed by the central bank--a proxy for systemic liquidity surplus-- stood at INR 4.04 trillion Thursday, the highest since May 19, 2022. 

The figure was also higher than Wednesday's amount when the central bank absorbed INR 3.75 trillion from the banking system. The rise in the surplus figure was largely on account of the month-end inflows from the government's payment for salary and pension which is likely to have been in the range of INR 1.75 trillion to INR 2.00 trillion, dealers said.

"Excise duty and TDS outflows won't have a significant impact on money market rates," a dealer at a state-owned bank said. "Hardly around INR 500 billion goes out of the system because of it, it won't be able to impact such a high liquidity figure." 

In the coming week, due to a lack of significant outflows, call money market rates are expected to remain in the range of 4.90-5.35%, while tri-party market rates are seen in the range of 4.80-5.25%.  

OUTLOOK

* On Monday, the one-day call money rate may open near RBI's repo rate of 5.50%.

* During the day, the call rate is seen in a range of 4.90-5.35%, dealers said.

CALL RATE

4.80%--Saturday's close for two-day loans

5.30%--Saturday's open for two-day loans

4.75%--Friday's close for three-day loans

End

Edited by Deepshikha Bhardwaj

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