India Call
Near repo in early trade Wed; rates seen at repo on VRRR Thu
This story was originally published at 20:34 IST on 13 August 2025
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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% Wednesday, but was near the repo rate during the day due to increased borrowing on a lower liquidity surplus with banks after they parked 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 central bank's net absorption of funds, was INR 2.63 trillion on Tuesday, slightly lower than INR 2.77 trillion Monday.
The one-day call money market rate settled at 5.00%, compared with Tuesday's close of 5.05%. The call rate moved in a range of 4.75-5.55% Wednesday. The weighted average call money rate was at 5.46%, a tad higher than 5.45% Tuesday. The triparty repo market rate closed at 5.12% with the weighted average rate at 5.36%, compared with the weighted average rate of 5.41% Tuesday.
The weighted average triparty repo rate eased lower than the weighted average call money rate for the first time this week, as mutual funds started lending in the triparty repo market after 1400 IST, dealers said. Some mutual funds had cash surplus but were lending at higher rates since there were more borrowers in money markets, dealers said.
"It's just a trend which people are following, they're riding the rally," a dealer at a state-owned bank said. "Rates rose higher and people take the previous day's weighted-average close as the base for their rates. Liquidity is there because people have parked money in SDF and CRR, and mutual funds also have cash they're just charging at higher rates."
Small finance banks and primary dealerships were larely on the borrowing side Wednesday, while some banks, including cooperative banks, were on the lending side. Rates were also on the higher side in anticipation of the RBI conducting a VRRR auction Thursday of INR 2 trillion for at least four days to roll over the INR 1.91 trillion currently parked with the RBI at VRRRs. Most traders expected the RBI to conduct an eight-day VRRR, though some said due to outflows for goods and services tax starting next week, the auction could be only for four days. Outflows of around INR 1.85 trillion are expected to start Monday for GST payments, though traders said the amount could be larger.
"We are seeing an on-month rise in GST outflows, the numbers are increasing," a dealer at a private sector bank said. "So maybe, this time's outflows could go upto INR 2.2-2.3 trillion."
On Thursday, traders may borrow aggressively to keep funds for any outflows during the long weekend, though some traders said that the call market being open on Saturday could provide some relief. Financial markets are closed on Friday for Independence Day.
OUTLOOK
* On Thursday, the four-day call money rate may open near the RBI's repo rate of 5.50% on demand for funds, and with the RBI's eight-day VRRR auction. Financial markets are closed on Friday for Independence Day.
* RBI will hold an eight-day variable rate reverse repo auction for INR 2 trillion at 0930-1000 IST Thursday. Traders expect the auction to be almost fully subscribed, though some said subscription could be less ahead of goods and service tax outflows next week.
* During the day, the call rate is seen in a range of 4.70-5.50%, dealers said.
CALL RATE
5.00%--Wednesday's close for one-day loans
5.55%--Wednesday's open for one-day loans
5.05%--Tuesday's close for one-day loans
BENCHMARK MIBOR (in %)
Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:
|
TENURE |
WEDNESDAY |
TUESDAY |
|
Overnight |
5.52 | 5.50 |
|
3-day |
-- | -- |
|
14-day |
5.74 | 5.73 |
|
1-month |
6.00 | 5.99 |
|
3-month |
6.10 | 6.09 |
India Call: Funds parked with RBI at VRRR pushes call rate above repo rate
MUMBAI – Money market rates remained under pressure Wednesday as banks struggled to meet their cash reserve needs after having parked nearly INR 2 trillion with the Reserve Bank of India under variable rate reverse repo auctions. The interbank call money rate opened above the RBI's repo rate and traders expect the rate to hover around the repo rate for most of the trading hours, dealers said. Participants on the lending side were few while primary dealerships were seen borrowing in the call money market and some small state-owned banks were seen actively borrowing in the triparty repo market, they said.
"Rates have hardened on account of high demand for funds since the last few days, because even if there is surplus in the system, most of it is locked with RBI," a dealer at a state-owned bank said. At 0916 IST, the one-day call money market rate was at 5.55%. The weighted average rate was also at 5.55%, higher than 5.50% the same time Tuesday. The rate in the triparty repo market was 5.43% and the weighted average rate was 5.41%. Banks have parked INR 1.91 trillion with the central bank under two variable rate reverse repo auctions of varied tenure, both of which are due for reversal on Thursday.
The surplus liquidity in the banking system, as indicated by the central bank's net absorption of funds, was at INR 2.63 trillion on Tuesday, slightly lower than INR 2.77 trillion Monday. Banks are trying to maintain higher cash reserves with the central bank this week owing to the upcoming outflows for goods and services tax payments, which are expected to commence on Aug. 21, dealers said. On Tuesday, cash reserves parked by the banks with the RBI were at INR 9.95 trillion, higher than INR 9.58 trillion, which is the daily average requirement for the current fortnight ending on Aug. 22.
"We can go aggressive this week with CRR maintenance because next week the liquidity conditions could be tighter once the GST outflows start," a dealer at another state-owned bank said. Most traders are of the view that the central bank will likely announce a variable rate reverse repo auction Thursday to rollover the six-day auction which will reverse the same day. However, the quantum of the auction is likely to be around INR 1 trillion, lower than the INR 2-trillion auction held Friday on account of goods and services tax payouts scheduled for next week, dealers said. Traders expect money market rates to remain higher on Thursday as well, ahead of the long weekend on account of Independence Day holiday Friday, dealers said.
Despite the rise in money market rates, most traders do not expect the central bank to conduct a variable rate repo auction Wednesday. "Rates are around repo only, and there are no outflows for now so it looks unlikely that there will be a VRR (variable rate repo) auction at this stage," a dealer at a private sector bank said. (Vidhushi RajPurohit)
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Avishek Dutta
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