More Stories

Informist, Tuesday, Jul. 29, 2025

By Vidhushi RajPurohit

MUMBAI – The Reserve Bank of India's variable rate reverse repo auction pushed up the weighted average money market rates slightly higher Tuesday, dealers said. Ample surplus liquidity in the banking system and a lack of significant outflows for the day kept the rates from shooting up, they said. Some small finance banks and primary dealerships were active on the borrowing front.  

The one-day call rate closed at 4.95%. The weighted average rate was at 5.38%, slightly higher than 5.35% Monday. The rate in the larger triparty repo rate market closed at 5.10%, below the RBI's Standing Deposit Facility rate 5.25%. The weighted average rate for the triparty repo rate market ended at 5.30%, up from 5.26% Monday. 

"The VRRR auction came earlier than what I was expecting because inflows have not begun yet so rates moved up in morning," a dealer at a private sector bank said. "There was not that aggressive bidding because for three days it makes no sense to park funds right now. Maybe if they have an overnight auction that will see more bids."

At the three-day variable rate reverse repo auction, the RBI accepted all bids amounting to INR 460.58 billion against the notified amount of INR 500 billion. The auction was held at 0930-1000 IST, earlier than the usual 1030-1100 IST. Some traders said the timing of the auction was pushed earlier to elicit more participation because most banks are done with managing their daily funding needs through the money market by the initial trading hour. Traders expect the RBI to conduct more variable rate reverse repo auctions when the inflows from government's salary and pension payments hit the banking system. 

On Monday, the net liquidity absorbed by the RBI--a proxy for the systemic liquidity surplus--was INR 2.24 trillion, down from INR 2.48 trillion on Sunday. Traders expect the month-end inflows to add around INR 1.5 trillion into the banking system. 

"The weighted average rates were slightly higher but if you see the rates did not even reach repo rate because there is not much constraint for funds now," a dealer at a state-owned bank said. "Even at TREPs, the rates were below repo even though it is near month end, it looks like mutual funds are also not under major pressure for funds."

Traders await the RBI to release the draft guidelines on the liquidity management framework, which is expected this week. The guidelines will likely detail the optimal level of liquidity in the banking system for the central bank. 

OUTLOOK

* On Wednesday, the one-day call rate is likely to open below the RBI's repo rate as month-end inflows will likely start. 

* During the day, the call rate is seen in a range of 4.80-5.50% and the triparty repo rate in a range of 4.80-5.45%.

CALL RATE

4.95%--Tuesday's close for one-day loans

5.45%--Tuesday's open for one-day loans

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

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Near RBI's repo rate ahead of 3-day VRRR auction at 0930-1000 IST

MUMBAI - The interbank call money rate opened near the Reserve Bank of India's repo rate of 5.50% Tuesday ahead of the three-day variable rate reverse repo auction held at 0930-1000 IST, dealers said. Market is split over the subscription of the three-day variable rate reverse repo auction, they added. 

At 1000 IST, the one-day call rate was at 5.45% against the close of 5.00% on Monday. The weighted average call rate was 5.45%, slightly up from 5.40% at the same time on Monday. The triparty repo rate, a market where mutual funds are the primary lenders, was 5.33%, up from 5.20%. The weighted average rate for tri-party repo was 5.32%, up from 5.28% on Monday.

The central bank Monday said it will hold a three-day variable rate reverse repo auction for INR 500 billion between 0930 IST and 1000 IST Tuesday. The reversal of the tender will take place Friday. The timing of the auction was different from the usual operations which used to be conducted at 1000-1030 IST. 

Market participants speculated that the reason behind this move could be to ensure aggressive participation. "They (RBI) did this probably because by 1030 IST most of the volumes are covered. Most of the banks have already lent funds in the overnight market by then," a dealer at a state-owned bank said. "I think this is an attempt by RBI to improve subscription at these auctions." 

According to an Informist poll of seven market participants, most traders don't expect the auction to be fully subscribed due to some initial public offering and the tenure of the auction, dealers said. Market participants also cited the possibility of RBI letting its short dollar/rupee forward positions mature, rather than rolling it over. "I don't think people will go aggressively at the auction, I don't even expect it to be fully subscribed. Some banks who have enough surplus might be willing to lock in funds for three days, but I won't go because of the tenure," a dealer at a private sector bank said. "I would rather prefer keeping some funds for IPOs and would maintain a higher cash balance."

A few traders who expect the auction to be fully subscribed and aggressively bid by traders reasoned their expectation with the upcoming inflows for government month-end spending which will add around INR 1.25 trillion to INR 1.5 trillion into the banking system. "I don't see an issue with parking funds for three days, especially when I know that we will have inflows from government month end spending." On Monday, the net liquidity absorbed by the RBI--a proxy for the systemic liquidity surplus--was INR 2.24 trillion, down from INR 2.48 trillion on Sunday. (Siddhi Chauhan)

End

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

Edited by Deepshikha Bhardwaj

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.