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Informist, Friday, Aug. 8, 2025

 

BY Cassandra Carvalho

 

MUMBAI – The three-day interbank call money market rate ended below the Reserve Bank of India's Standing Deposit Facility rate of 5.25% Friday. However, rates rose above the Marginal Standing Facility rate of 5.75% during the day due to RBI's two variable rate reverse repo auctions, dealers said.  

 

The three-day call money market rate settled at 4.95%, after touching the day's high of 5.70%, compared with 4.95% at Thursday's one-day close. The weighted average call money rate was at 5.55%, higher than 5.44% Thursday. The rate in the triparty repo market closed at 5.28% with the weighted average rate at 5.47%, compared with a weighted average rate of 5.39% the previous session. 

 

"People are cautious because of what happened yesterday (Thursday)," said a dealer at a private sector bank. "There was an oversubscription (Thursday). So the VRRRs were not fully subscribed (Friday) and already rates were higher because of the auctions."

 

The RBI conducted a six-day VRRR auction of INR 2 trillion Friday and the central bank took all INR 1.46 trillion worth of offers. The RBI also conducted a three-day VRRR auction of INR 1 trillion, and the central bank accepted all offers worth INR 130.45 billion. Some traders now expect another overnight VRRR of INR 500 billion to INR 1 trillion either on Monday or later in the week. 

 

Traders said that some small state-owned banks were on the borrowing side Friday, along with foreign banks. Some traders expect rates to be on the upper side next week due to the RBI's continuous VRRR auctions. On Thursday, a cash crunch from some market participants such as foreign primary dealerships and some mutual funds had led to borrowing rates rising to 6.00%. Some of the RBI's transactions in the foreign exchange market also may weigh on liquidity, dealers said. 

 

"I see the liquidity around INR 3.10 trillion next week. Some outflows are there around tenth and eleventh but they're not much, but because of the VRRRs and the NDF settlements, I see some tightness in rates," a dealer at a state-owned bank said. 

 

As per the latest RBI data, the central bank net absorbed INR 3.55 trillion, down from INR 3.91 trillion Wednesday. The cash balance parked with the RBI was at INR 9.20 trillion, slightly lower than INR 9.24 trillion Wednesday, while the average daily requirement was at INR 9.56 trillion.

 

OUTLOOK

* The call money market is shut Saturday. On Monday, the one-day call money rate may open below the RBI's repo rate of 5.50% due to ample liquidity in the banking system.

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

 

CALL RATE

4.95%--Friday's close for three-day loans

5.60%--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	5.63	5.39
3-day	--	--
14-day	5.74	5.72
1-month	6.00	5.99
3-month	6.09	6.09

 

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India Call: Rates surge above repo as RBI conducts two VRRR auctions

 

MUMBAI – The three-day call money market rate opened above the Reserve Bank of India's repo rate ahead of two variable-rate reverse repo auctions. Rates were also higher in early trading hour on account of banks' demand for funds to maintain cash reserves with the central bank as the current reporting fortnight ends Friday, dealers said. Traders expect the rates in the money market to remain elevated as they expect strong demand from primary dealerships and also some state-owned banks. 

 

The three-day call rate was at 5.60%, as of 0930 IST and the weighted average rate was at 5.65%. In the triparty repo market, the rate was at 5.50%, sharply up from 5.34% at the same time Thursday. 

 

"Not many lenders are there in the market and it is Friday so those who are will charge higher rates now for giving money for three days," a dealer at a state-owned bank said. "Yesterday also there was strong demand and it was very sudden because by afternoon MFs were not there in the market, so today people will tend to borrow before rates rise more sharply."

 

On Thursday, rates in the money market spiked as banks had parked INR 2.89 trillion with the RBI under three variable rate reverse repo auction of different tenures and there was requirement to maintain cash reserves ahead of the reporting Friday, dealers said. Outflows for tax deducted at source and excise duty payment were estimated to have drained around INR 500 billion Thursday. As per the latest RBI data, the central bank net absorbed INR 3.55 trillion, down from INR 3.91 trillion Wednesday. The cash balance parked with the RBI was at INR 9.20 trillion, slightly lower than INR 9.24 trillion Wednesday, while the average daily requirement was at INR 9.56 trillion.

 

Owing to high rates in the money market, traders expect the variable-rate reverse repo auctions to be undersubscribed. At the first variable-rate reverse repo auction which is for six days with a notified amount of INR 2 trillion, total offers are expected to range from INR 750 billion to INR 1.25 trillion as per an Informist poll of eight market participants. The auction was from 0930-1030 IST.  

 

"We are getting 5.60% in (money) market for three-day loans so it will be better to go there than lock up funds for six days at 5.49%," a dealer at a private sector bank said. "There are two auctions also, so people will also wait for the three-day one before parking aggressively at the six-day one." The central bank will also hold a three-day, INR 1-trillion variable rate reverse repo auction at 1030-1100 IST. 

 

Traders expect the money market rates to take cues from the subscription at the two variable rate reverse repo auctions. "If banks lock their funds heavily at auction then the rates will remain above repo for the day," the dealer at the state-owned bank said. (Cassandra Carvalho)  

 

End

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

 

Edited by Deepshikha Bhardwaj

 

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