More Stories

Informist, Tuesday, Aug. 5, 2025

 

By Cassandra Carvalho

 

MUMBAI – The call money market rate ended below the Reserve Bank of India's standing deposit facility rate of 5.25% Tuesday due to ample surplus liquidity in the banking system and low demand for funds, dealers said. The RBI did not conduct any variable-rate reverse repo auction Tuesday, likely due to the outcome of the Monetary Policy Committee's three-day meeting Wednesday. 

 

The one-day call money rate settled at 4.90%, down from 4.95% Monday. The weighted average rate ended at 5.36%, a tad down from 5.37% Monday. The weighted average triparty repo rate was at 5.20%, down from 5.22% the previous day. The central bank net absorbed INR 4.00 trillion from the banking system Monday, largely unchanged from INR 4.10 trillion Sunday.

 

Primary dealerships were on the borrowing side, while some co-operative banks and state-owned banks were on the lending side, dealers said. Borrowers in the money markets were few due to lack of scheduled outflows Tuesday, and surplus liquidity in the banking system. 

 

Traders will focus on RBI Governor Sanjay Malhotra's address at 1000 IST Wednesday. Most traders do not expect a rate cut, but said that money market rates could open slightly lower Wednesday due to the possibility of a rate cut. A small section of dealers has positioned themselves for a rate cut Wednesday, they said, especially as a few economists have forecast a cut of 25 basis points.

 

Fourteen of the 17 economists polled by Informist said they expect the Monetary Policy Committee to leave the repo rate unchanged at 5.50% Wednesday. However, three poll participants said a rate cut remains a possibility after retail inflation fell to an over-six-year low of 2.10% in June and averaged 2.7% in Apr-Jun, 20 bps lower than the central bank's projection and well below its mandated target of 4.0%. Traders said money market rates could be volatile during the day depending on the governor's comments on rates and liquidity. 

 

"There'll definitely be a boomerang in rates tomorrow (Wednesday) depending on whether RBI cuts the rates or not," a dealer at a state-owned bank said.

 

If the MPC does not cut rates and weighted average borrowing rates drop below the RBI's standing deposit facility rate of 5.25%, the central bank could announce a variable-rate reverse repo auction of INR 500 billion to INR 1.00 trillion Wednesday itself, dealers said. 

 

Traders said that the RBI likely took delivery of its six-month dollar/rupee buy/sell swap Monday by infusing $5 billion into the financial system while simultaneously taking out around INR 437 billion of rupee liquidity, at the Monday's exchange rate. This drain in the rupee liquidity likely reflected in the cash reserves parked with the central bank, dealers said. On Monday, banks decreased the amount parked with the RBI as cash reserve to INR 9.25 trillion, from INR 9.73 trillion Sunday. The amount was lower than the average daily cash reserve requirement for the current fortnight, ending Friday, which is at INR 9.56 trillion.

 

"It (the RBI) would've taken delivery," a dealer at another state-owned bank said. "The liquidity is in surplus and dollar rates are also good, so there's no reason why the RBI won't take delivery."

 

At the fourth yet another session of the triparty repo and market repo markets closing at 1600 IST, volumes in both markets did not rise substantially, compared to volumes prior to the market timing extension before Aug. 1. Dealers said while the extension of hours was beneficial, it would take a few months at least for volume to increase due to the new timing. Most traders wrapped up their main operations by around 1400 IST, dealers said. 

 

"Sometimes we get deposits or loan disbursements from other branches, between 3pm to 4pm," a dealer at a private sector bank said. "So definitely the new timing is beneficial in the long run, but it will take some time for liquidity to develop."

 

Traders also await the RBI's new liquidity management framework, which the central bank will likely release at the MPC meeting outcome Wednesday. The framework is likely to provide clear direction on the newly introduced overnight money market benchmark rate, the secured overnight rupee rate, dealers said. Traders await clarity that the RBI will target the overnight weighted average call money rate for its liquidity management. Dealers expect the RBI to define the optimal level of liquidity in the banking system in the draft guidelines. Dealers speculated that the central bank could introduce either daily overnight VRRR and VRR auctions, or a fixed-rate repo or reverse repo window system. Some dealers said an alternative to daily fine-tuning options was possible.

 

Later in the week, traders expect outflows of around INR 400 billion to INR 500 billion for tax deducted at source.

 

OUTLOOK

* Wednesday, the one-day call money rate may open lower than the RBI's repo rate of 5.50% on low demand for funds from banks and speculation of a possible rate cut of 25 bps.

* If the RBI does not cut rates, traders expect a variable-rate reverse repo auction Wednesday if borrowing rates fall below the current SDF rate. 

* During the day, the call rate is seen in a range of 4.70-5.50%, dealers said.

 

CALL RATE

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

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

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

 

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	TUESDAY	MONDAY
Overnight	5.41	5.43
3-day	--	--
14-day	5.75	5.75
1-month	5.99	5.99
3-month	6.09	6.09

 

---

India Call: Below repo as surplus systemic liquidity at INR 4 tln

 

MUMBAI – Borrowing requirements were subdued Tuesday as systemic liquidity surplus was at INR 4 trillion Monday, dealers said. Consequently, rates in the interbank call money market were below the Reserve Bank of India's repo rate of 5.50%. Primary dealerships continued to remain on the borrowing side along with some state-owned banks, they said. 

 

At 0920 IST, the one-day call money market rate was at 5.40%, with the weighted average rate at 5.42%. The triparty repo market rate was at 5.24%, below the RBI's Standing Deposit Facility rate of 5.25%. Traders were of the view that the call money rate will also likely fall below the Standing Deposit Facility rate after the early trade rush as most participants would have met their funding needs. 

 

"In the morning, it is usually demand for cash reserves which is why some banks are there in the market but if you see after a few hours rates drop as there is more than enough liquidity now," a dealer at a state-owned bank said.

 

On Monday, banks decreased the amount parked with the RBI as cash reserve to INR 9.25 trillion, from INR 9.73 trillion Sunday. The amount was even lower than the average daily cash reserve requirement for the current fortnight, ending Friday, which is at INR 9.56 trillion.

 

Traders attributed the lower cash reserves maintained to the outflows for the delivery of the RBI's dollar/rupee buy-sell swaps which matured Monday. The RBI giving delivery of the forward dollars it sold as a part of the swap entailed that the central bank infused $5 billion into the financial system while simultaneously taking out around INR 437 billion of rupee liquidity, at the Monday's exchange rate. On the liquidity front, the central bank net absorbed INR 4.00 trillion from the banking system Monday, largely unchanged from INR 4.10 trillion Sunday.

 

Despite the ample surplus liquidity and low money market rates, traders are of the view that the central bank will likely skip variable rate reverse repo auction until the policy day Wednesday. The RBI's Monetary Policy Committee commenced its three-day policy review meeting Monday. Most money market dealers are of the view that the rate-setting panel will likely keep the policy rates unchanged. They now keenly await the draft guidelines on the liquidity managment framework which the central bank is expected to detail Wednesday and the commentary on a optimal level of liquidity. Some traders even expect clarity on the Secured Overnight Rupee Rate--the newly introduced overnight money market benchmark rate, dealers said. (Vidhushi RajPurohit)

 

End

 

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.