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Informist, Saturday, Jul. 19, 2025

By Vidhushi RajPurohit

MUMBAI – Lower requirement for funds and muted volumes--usual on Saturdays--led the weighted average money market rates to end sharply below the Reserve Bank of India's standing deposit facility rate of 5.25%. Ample surplus liquidity in the banking system also kept borrowing rates down for the day. Total trade volume fell sharply to INR 8.98 billion with only 66 trades, against INR 142.72 billion Friday.

The two-day call money rate settled at 5.00%, down from 5.10% for three-day loans Friday. The weighted average rate ended at 5.00%, down from 5.25% Friday. The rates in the triparty repo market also closed lower, with the weighted average rate at 5.07%, sharply down from 5.31% Friday.

Friday, rates in the money market were under pressure as the RBI held an INR 2.00-trillion variable rate reverse repo auction to absorb surplus liquidity. Traders were of the view that the rates might be slightly higher next week on account of outflows due to payment of goods and services tax. The outflow is estimated to drain around INR 1.75 trillion from the banking system. However, traders do not expect any significant long-term strain on systemic liquidity as they anticipate month-end inflows to offset the impact of the outflows.

As per the latest RBI data, the central bank net absorbed INR 3.09 trillion from the banking system Thursday. Banks maintained a cash balance of INR 9.70 trillion with the RBI, slightly higher than INR 9.63 trillion, which is the average daily cash reserve requirement for the fortnight ending Friday.

So far, banks have maintained an average daily amount of INR 9.80 trillion with the RBI. Banks were maintaining a higher cash balance with the RBI at the start of the fortnight to lessen the pressure of maintaining the reserve when the tax outflows commence, dealers said.

OUTLOOK

* Monday, the one-day call money rate may open near the RBI's repo rate of 5.50% on demand for funds from banks for goods and services tax outflows.

* During the day, the call rate is seen in a range of 5.00-5.50%, dealers said.

CALL RATE

5.00%--Saturday's close for two-day loans

5.40%--Saturday's open for two-day loans

5.10%--Friday's close for three-day loans

End

Edited by Nishant Maher

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