More Stories

Informist, Thursday, Jul. 10, 2025

By Siddhi Chauhan

MUMBAI – Money market rates remained under pressure Thursday due to requirements ahead of reporting Friday, dealers said. The INR-1-trillion two-day variable rate reverse repo auction conducted on Wednesday also contributed to the rise in rates, they added. 

After touching the day's high of 5.45%, the one-day call money rate settled at 4.90% Thursday, slightly down from 5.00% Wednesday. The weighted average call settled at 5.36% Thursday, up from 5.32% Wednesday, while the weighted average rate for the tri-party repo market settled at 5.25%, slightly down from 5.29% Wednesday. During the day, the call rate moved in the range of 4.75-5.45%. After opening at the day's high of 5.30%, the tri-party repo rate closed at 5.20% and moved in the range of 5.15-5.30%. 

"There was demand for funds in the first half because of reporting Friday needs," a dealer at a state-owned bank said. "A few banks had to borrow money in the morning as they faced a shortage of funds after parking money in the VRRR auction yesterday (Wednesday). "This is why the weighted average call rate was up even in the second half, but the weighted average TREPs rate saw a cool-off towards the end."

As per the prudential requirements, banks are required to maintain an average cash balance with the central bank. For the fortnight ending Friday, banks are supposed to maintain an average of INR 9.52 trillion. Banks Wednesday maintained a cash balance of INR 9.21 trillion with the RBI, down from INR 9.39 trillion, data from the central bank showed. Of the 12 days this fortnight, banks have maintained an excess cash balance for six days, data from the RBI showed. On Wednesday, the RBI net absorbed INR 3.27 trillion, slightly higher than the INR 3.07 trillion absorbed on Tuesday.

The weighted average tri-party repo rate closed slightly lower than the previous day as mutual funds were deploying their funds, dealers said. "Mutual funds cannot participate in VRRRs, so this is a good opportunity for them," a dealer at a private-sector bank said. "The amount of borrowers has increased and mutual funds have enough cash with them, so they are deploying here."

While no significant outflows are scheduled for Friday, market participants expect an upward pressure on money market rates, dealers said. "Tomorrow (Friday), I think the call rate can touch repo rate," a dealer at a private-sector bank said. "Banks will also borrow ahead of the VRRR auction, and fortnight requirements will also be there." Money market participants expect the call rate to be in a range of 4.85-5.50%, while the tri-party repo might trade in the range of 4.80-5.40%. 

Post market hours, the RBI announced that it will conduct a seven-day variable rate reverse repo operation on Friday for a notified amount of INR 2.5 trillion. Though expected, as two VRRR auctions worth INR 1.97 trillion are due for reversal on Friday, the quantum is slightly higher than anticipated, dealers said. Traders had estimated the notified amount to be INR 1.5 trillion to INR 2 trillion, dealers said. Some banks might hesitate to park funds at the auction on Friday as they might not want to lock in their funds for such a long maturity, dealers said. 

OUTLOOK

* On Friday, the three-day call rate may open slightly near the RBI's repo rate due to variable rate reverse repo and fortnight requirements, dealers said.

* During the day, the call rate is seen in a range of 4.85-5.50% and the tri-party repo rate in a range of 4.80-5.40%.

CALL RATE

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

5.40%--Thursday's open for one-day loans

5.00%--Wednesday's close for one-day loans

BENCHMARK MIBOR (in %)

Mumbai Interbank Offer Rates compiled by Financial Benchmarks India:

India Call: Below repo rate; market expects another VRRR auction Friday

MUMBAI – The interbank call money rate was below the Reserve Bank of India's repo rate of 5.50% as the surplus systemic liquidity in the banking system was over INR 3 trillion, dealers said. However, the call rate opened at 5.40%, the highest opening level this month, with traders citing the INR 1 trillion, two-day variable rate reverse repo auction held Wednesday for the rise. Money market rates are expected to stay elevated for most part of the day on account of funding requirements of banks for reporting Friday, they said.

Dealers said weighted average rates for call money market were also up on account of the variable rate reverse repo operation conducted by the Reserve Bank of India Wednesday, dealers said. At the auction, the RBI received offers worth INR 973.15 billion, lower than the notified amount of INR 1 trillion. RBI accepted all the offers and set the cut-off at 5.49%.

At 0954 IST, the weighted average call rate was at 5.39%. The triparty repo rate, a market where mutual funds are the primary lenders, opened at 5.30% and its weighted average rate was at 5.27%.

"Borrowers might need to borrow money in the day as some face fund shortages after parking money in the VRRR auction yesterday (Wednesday)," a dealer at a state-owned bank said. On Wednesday, the RBI net absorbed INR 3.27 trillion, slightly higher than the INR 3.07 trillion absorbed on Tuesday. Banks maintained a cash balance of INR 9.21 trillion with the RBI, lower than the INR 9.39 trillion maintained Tuesday, RBI data showed. For the current fortnight ending Friday, the daily average cash reserve requirement is INR 9.52 trillion.

Traders expect the RBI to announce another variable rate reverse repo auction on Friday for either seven or 14 days, as two such auctions worth INR 1.97 trillion are due for reversal. Dealers estimate the notified amount of the auction at INR 1.5 trillion to INR 2 trillion. "The RBI can even come up with overnight (3-day) auction if it sees that banks are not willing to lend money for long term," a dealer at a state-owned bank said.  End

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

Edited by Saji George Titus

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.