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Informist, Monday, Aug. 11, 2025

 

By Cassandra Carvalho

 

MUMBAI – The one-day interbank call money market rate ended below the Reserve Bank of India's Standing Deposit Facility rate of 5.25% Monday, after largely remaining at the upper end of the day's trading range in early hours due to the three-day variable rate reverse repo auction.   

 

The one-day call money market rate settled at 5.00%, compared with Friday's close of 4.95% for three-day loans. The call rate moved in a range of 4.75-5.45% Monday. The weighted average call money rate was at 5.36%, down from 5.55% Friday. The triparty repo market rate closed at 5.20% with the weighted average rate at 5.35%, compared with the weighted average rate of 5.47% Friday. As per the latest RBI data, the central bank net absorbed INR 2.47 trillion Sunday, down from INR 3.13 trillion Friday. The cash balance parked with the RBI increased to INR 10.00 trillion Sunday, from INR 9.34 trillion Friday, compared with the average daily requirement of INR 9.58 trillion.

 

Despite being a collateralised market, the weighted average triparty repo rate was almost at par with the weighted average call money rate. Mutual funds have recently reduced their lending in the triparty repo market, which led to money market rates shooting to 6.00% last week. Some mutual funds are facing a cash crunch due to lower-than-expected inflows, dealers said. 

 

"MFs were not that active in TREPs today as there was not that much inflow there," a dealer at a private sector bank said. 

 

The RBI impounded INR 447.90 billion Monday through a three-day VRRR auction as against the notified amount of INR 500.00 billion. Traders had expected the VRRR announcement since the liquidity surplus was comfortable despite banks parking around INR 1.59 trillion with the RBI at Friday's two VRRR auctions. Small state-owned banks, which have been on the borrowing side lately, did not participate in the VRRR. Traders noted that some market participants, including small finance banks and small state-owned banks, refrained from borrowing funds in the first half of the day due to higher rates resulting from the VRRR. For the rest of the week, if rates trade near the RBI's Standing Deposit Facility rate of 5.25%, traders expect more VRRR auctions. 

 

"Morning 9 to 10 (0900 IST to 1000 IST) queries were there (from borrowers in the call money market), but after the VRRR rates were high, so we didn't get that many quotes," a dealer at a state-owned bank said.  

 

Some of the RBI's transactions in the foreign exchange market may weigh on systemic liquidity, dealers said. Some outflows in the foreign exchange market deterred traders from lending Monday, a dealer said, while another dealer said the amount was not of any significance. Bloomberg reported Monday that the RBI sold at least $5 billion worth of dollars across both onshore and offshore currency markets so far in August, citing sources.

 

OUTLOOK

* On Tuesday, 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

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

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

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

 

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	MONDAY	FRIDAY
Overnight	5.41	5.63
3-day	--	--
14-day	5.73	5.74
1-month	6.00	6.00
3-month	6.09	6.09

 

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India Call: Below repo rate as surplus liquidity remains above INR 3 tln

 

MUMBAI – The interbank call money rate opened below the Reserve Bank of India's repo rate on Monday because of low demand for funds from banks as surplus liquidity in the banking system remained above INR 3 trillion, dealers said. Some traders expect the Reserve Bank of India to announce a short-tenure variable rate reverse repo auction. This kept the rate anchored around 5.40%. However, dealers expect the rate to cool off later in the day due to ample systemic surplus.

 

At 0915 IST, the one-day call money market rate was at 5.45%, with the weighted average rate at 5.42%. The rate in the larger triparty repo market, which includes mutual funds, was at 5.30% and the weighted average rate was at the same level.

 

Participation at the three-day variable rate reverse repo auction on Friday was low and the auction will reverse Monday, so traders expect the RBI to announce another VRRR auction during the day, a dealer at a private sector bank said. "If it (RBI) holds one (more VRRR) auction today, then rates can go to repo also."

 

The central bank conducted two variable rate reverse repo auctions Friday. At the six-day auction for INR 2 trillion, the central bank took all INR 1.46 trillion worth of offers. In the three-day variable rate reverse repo auction of INR 1 trillion, it accepted all offers worth INR 130.45 billion. The three-day auction will reverse Monday and traders expect the RBI to announce another auction Monday, with the expected notified amount ranging from INR 500 billion to INR 1 trillion. However, some traders expect the central bank to gauge the market rates and hold an auction only if the money market rates fall sharply below the repo rate.

 

"If you see, rate is touching 5.45% so it is a bit tricky to say whether or not there will be another auction," a dealer at a state-owned bank said. "But in case there is one, participation will be good as they can get arbitrage by borrowing at 5.31% from TREPs and then parking at VRRR auction at 5.49%."

 

On the liquidity front, the RBI net absorbed INR 3.13 trillion from the banking system Friday, lower than INR 3.55 trillion Thursday. Banks also increased the amount of funds parked with the central bank as cash reserves to INR 9.34 trillion Friday, up from INR 9.20 trillion Thursday. The average daily requirement for the fortnight which ended Friday was INR 9.56 trillion, and banks maintained an average daily balance of INR 9.59 trillion. 

 

During the day, payment for government bond auction, which was held Friday, will lead to an outflow of INR 250 billion. No other major outflows are scheduled for the day, dealers said. Consequently, traders expect the money market rates to fall below the RBI's Standing Deposit Facility rate of 5.25% later in the day. (Vidhushi RajPurohit)

 

End

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

 

Edited by Saji George Titus

 

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