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Informist, Friday, Aug. 1, 2025

 

By Vidhushi RajPurohit

 

MUMBAI – The interbank call money rate settled below the Reserve Bank of India's repo rate of 5.50% Friday as systemic liquidity rose on month-end inflows, dealers said. Rates inched up early in the trade as the RBI held a seven-day variable rate reverse repo auction. However, they cooled off later in the day on account of more lenders and reduced borrowing needs, they added.

 

"There were some borrowers, but rates did not increase that much because the liquidity surplus was high and MFs (mutual funds) were also very active on lending side," a dealer at a state-owned bank said. Most of the borrowing was done by primary dealerships and some small finance banks, dealers said.

 

The three-day call money market rate ended at 5.35%, with the weighted average rate at 5.46%. Rate in the triparty repo rate market, where mutual funds are the major lenders, closed at 5.00%. The weighted average triparty repo market rate was 5.33%, down 10 basis points from the previous close. Dealers attributed the fall in the rate to subsiding month-end redemption pressure on mutual funds.

 

On Thursday, the net liquidity absorbed by the RBI--a proxy for the systemic liquidity surplus--was INR 2.86 trillion, up from INR 2.54 trillion on Wednesday, central bank data showed. The rise in the liquidity surplus was on account of the inflows from government's salary and pension payouts which is estimated to be around INR 1.25 trillion to INR 1.50 trillion, dealers said. Banks also increased the funds parked with the RBI as cash reserves to INR 9.96 trillion, from INR 9.73 trillion Thursday. For the current fortnight, which ends on Aug. 8, the daily average cash reserve requirement is INR 9.56 trillion.

 

"Major inflows have already come, but the spending usually comes in tranches, so we will see the complete impact of the inflows by next week," a dealer at another state-owned bank said. "There can be more VRRR auctions next week because RBI will not want rates to fall lower than SDF rate." On Friday, three variable rate reverse repo auctions reversed, which will cumulatively amounted to INR 1.84 trillion.

 

At the seven-day variable rate reverse repo auction for INR 2 trillion Friday, the central bank took all offers worth INR 1.72 trillion. The cut-off was set at 5.49%. The auction was under subscribed, despite high surplus liquidity, as participants were hesitant to park their funds for the seven-day tenure, dealers said. "If it was an overnight one, then there would have been a case for complete subscription," a dealer at a private sector bank said. 

 

Some dealers were also unsure of the impact RBI's intervention in the foreign exchange market will have on the banking system's liquidity. The rupee has been under pressure after US President Donald Trump announced 25% tariff on India, starting Friday. To support the rupee, RBI is likely selling dollars which will drain rupee liquidity. However, some dealer said the intervention has not been that aggressive and that currently the liquidity surplus is comfortable enough to absorb the outflows without sliding sharply. 

 

Money market dealers also await clarity on the RBI's dollar/rupee buy-sell swaps which are set to mature Monday. Informist had Tuesday reported that the RBI has strong reasons to give delivery of $5 billion on its dollar/rupee buy-sell swaps given the ample rupee liquidity in the banking system. The RBI giving delivery of the forward dollars it sold as a part of the swap would entails the central bank infusing $5 billion into the financial system while simultaneously taking out around INR 438 billion of rupee liquidity, at the current exchange rate.

 

Traders also await the RBI's new liquidity management framework, which the central bank will likely release at the Monetary Policy Committee meeting Wednesday. The framework will likely provide clear directions on the newly introduced overnight money market benchmark rate, the Secured Overnight Rupee Rate, dealers said.

 

OUTLOOK

* On Saturday, the two-day call rate is likely to open below RBI's repo rate as surplus liquidity rises on month-end inflows.

* Volumes are expected to be low, as is usual on Saturdays, as banks meet their requirement for funds the previous day.

* During the day, the call rate is seen in a range of 4.80-5.45% and the triparty repo rate in seen in a range of 4.70-5.40%.

 

CALL RATE

5.35%--Friday's close for three-day loans

5.45%--Friday's open for three-day loans

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

 

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	FRIDAY	THURSDAY
Overnight	5.50	5.54
3-day	--	--
14-day	5.75	5.75
1-month	6.00	6.00
3-month	6.10	6.10

---

India Call: At repo rate on VRRR; surplus liquidity up on month-end inflows

 

MUMBAI – The interbank call money rate was at the Reserve Bank of India's repo rate of 5.50% Friday as the central bank conducts a seven-day variable rate reverse repo auction, dealers said. However, ample surplus liquidity in the banking system and inflows from the government's month-end spending are likely to cool rates later in the day, they said.

 

The three-day call money rate opened at 5.45% Friday and, at 1007 IST, the weighted average call rate was 5.50%. The triparty repo rate, where mutual funds are major lenders, opened at 5.35%, and the weighted average triparty repo rate was slightly higher at 5.43%. The triparty repo rate is expected to remain in the range of 5.35-5.50%, while call money rates are expected to be in the range of 5.30-5.55%.

 

"Overall, we do not see rates going higher later in the day, neither much lower. They will most likely remain around 5.35%," a dealer at a private sector bank said. 

 

Month-end spending from the government's salary and pension payouts has led to a rise in surplus systemic liquidity. On Thursday, the net liquidity absorbed by the RBI--a proxy for the systemic liquidity surplus--was INR 2.86 trillion, against INR 2.54 trillion on Wednesday, central bank data showed. Three variable rate reverse repo auctions are also due for reversal on Friday, which will cumulatively amount to INR 1.84 trillion. 

 

Dealers held differing views on subscription to the VRRR, with some expecting it to be fully subscribed due to sufficient liquidity and month-end spending. "It seems it is going to be nearly fully subscribed as there is enough liquidity in the system and month-end spending is also there, so people will park money," a dealer at a state-owned bank said.

 

However, some dealers said it was likely to be undersubscribed as the seven-day tenure could prevent many participants from participating aggressively. At the auction, RBI accepted all offers worth INR 1.72 trillion and set the cut-off rates at 5.49%. According to an Informist poll, dealers expected the cut-off to be at 5.49% while total subscription amount ranged from INR 875 billion to INR 1.8 trillion. The median estimate was INR 1.44 trillion.  End

 

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

 

Edited by Ashish Shirke

 

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