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Informist, Tuesday, Aug. 12, 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% Tuesday, but was largely closer to the repo rate during the day due to lower liquidity surplus with banks after parking around INR 1.91 trillion at the RBI's variable rate reverse repo auctions. The surplus liquidity in the banking system, as indicated by the RBI's net absorption of funds, was at INR 2.77 trillion on Monday.

"We have less than INR-1-trillion surplus with us because everything is in the VRRR," a dealer at a state-owned bank said. "But because there are no outflows, I think rates should be within 5.45%-5.50%. Unless there is some extreme change, let's see what the liquidity number is tomorrow."

The one-day call money market rate settled at 5.05%, compared with Monday's close of 5.00%. The call rate moved in a range of 4.85-5.55% Tuesday. The weighted average call money rate was at 5.45%, up from 5.36% Monday. The triparty repo market rate closed at 5.15% with the weighted average rate at 5.41%, compared with the weighted average rate of 5.35% Monday. 

The weighted average triparty repo rate was almost at par with the weighted average call money rate for the second straight day, even though the former is a collateralised market. Mutual funds were once again lending less in the triparty repo market. Some mutual funds are facing a cash crunch due to redemption pressures, dealers said. Mutual funds were also selling gilts and were largely absent from the short-term debt market, dealers said.  

Primary dealerships and small finance banks were on the borrowing side Tuesday, while some banks were on the lending side. Traders said they were exercising more caution in lending and parking funds with the RBI at VRRRs due to the decreased lending from mutual funds in the triparty repo market.   

"People are much more cautious and that's why rates are also on the higher side, because mutual funds are not lending much, and we don't want a repeat of what happened last time," a dealer at a private sector bank said. 

Later in the day, however, the triparty rate cooled near the SDF rate, and traders expect the RBI to announce an overnight VRRR auction of INR 500 billion on Wednesday if the rates fall again. However, on Thursday, traders may borrow aggressively to keep funds for any outflows during the long weekend. Financial markets are closed on Friday for Independence Day. Traders expect the RBI to conduct an eight-day VRRR Thursday for around INR 2 trillion, but it may not be subscribed for more than INR 1.5 trillion due to outflows for goods and services tax scheduled for the next week.      

OUTLOOK

* On Wednesday, the one-day call money rate may open near the RBI's repo rate of 5.50% on demand for funds and low liquidity surplus currently available with banks.

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

CALL RATE

5.05%--Tuesday's close for one-day loans

5.50%--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: At repo as nearly INR 2-tln parked with RBI under VRRR auctions

MUMBAI – The interbank call money rate was at the Reserve Bank of India's repo rate in early trading Tuesday owing to expectations from some traders that the central bank will likely announce a short-tenure variable rate reverse repo auction, dealers said. Rates in the money market also spiked as so far banks have parked nearly INR 2 trillion with the RBI under its variable rate reverse repo auctions of different tenures, they said. 

At 0920 IST, the one-day call money market rate was at 5.50%. The weighted average rate was also at 5.50%, higher than 5.42% at the same time Monday. The rate in the triparty repo market was at 5.39% and the weighted average rate was also at the same level. Some traders were of the view that reduced participation from mutual funds on the lending front in the triparty repo market has led the rate to inch higher than the RBI's Standing Deposit Facility rate of 5.25%. 

"MFs are there in the market because if they weren't there, then the rates would go up to MSF rate (5.75%)," a dealer at a private sector bank said. "But what is happening is that maybe they are not that actively lending which is why rates are staying above 5.35%."

In the call money market, primary dealerships were remained active on the borrowing front, they said. Banks were also not that active on the lending front and were mostly seen borrowing at the triparty repo market after locking up most of the funds at 

variable rate reverse repo auctions, dealers said. Since Friday, banks have parked a cumulative sum of INR 1.91 trillion with the central bank under two VRRR auctions of varied tenure, both of which are due for reversal on Friday.

On Monday, the RBI net absorbed INR 2.77 trillion from the banking system, higher than INR 2.47 trillion Sunday. On Monday, payment for government securities auctioned Friday led to an outflow of INR 250 billion from the banking system. During the day, no major scheduled outflows are lined up and the money market rates are expected to cool off provided the central bank does not conduct a variable rate reverse repo auction Tuesday, dealers said. 

Traders held mixed views on whether the central bank will hold another variable rate reverse repo auction Tuesday. Some traders expected a two-day auction as the surplus liquidity in the banking system remained above INR 2.50 trillion. However, others were of the view that the central bank will likely skip the auction considering the elevated rates in the money market. 

"The central bank has signalled that it wants the weighted average call rate to remain near repo and that is already happening," a dealer at a state-owned bank said. "It is tricky to say whether or not there will be a VRRR auction but RBI will observe the rates and then decide." (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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