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Informist, Thursday, Aug. 14, 2025

 

By Cassandra Carvalho

 

MUMBAI – The four-day interbank call money market rate ended below the Reserve Bank of India's Standing Deposit Facility rate of 5.25% Thursday, but was near the repo rate during the day as traders borrowed funds ahead of the extended weekend. The RBI's eight-day variable rate reverse repo auction of INR 2.00 trillion Thursday also pushed up rates. As per latest data from RBI, the central bank net absorbed INR 2.90 trillion from the banking system on Wednesday, higher than INR 2.63 trillion Tuesday.

 

The four-day call money market rate settled at 5.10%, compared with Wednesday's one-day close of 5.00%. The call rate moved in a range of 4.85-5.68% Thursday. The weighted average call money rate was at 5.47%, a tad higher than 5.46% Wednesday. The triparty repo market rate closed at 5.20% with the weighted average rate at 5.37%, compared with the weighted average rate of 5.36% Wednesday. 

 

Rates were higher as traders parked around INR 1.83 trillion at the VRRR auction, which was largely expected. Traders also borrowed funds ahead of the extended weekend, though the call money market will be open on Saturday. Moreover, the current rates were being normalised as the RBI prefers the weighted average call money rate closer to the repo rate, dealers said.

 

"RBI wants rates here so this is completely usual," a trader at a primary dealership said. "If rates go to 5.70% or closer to MSF then there will be some panic in the market, but now this is where we expect rates to be, within 5.40-5.55%."   

 

Primary dealerships were the major borrowers during the day, especially for underwriting the INR-280-billion gilt auction, dealers said. Mutual funds were lenders in the triparty repo market, which kept the weighted average triparty repo rate much lower than the weighted average call money rate.

 

Traders were not expecting the RBI to announce any VRRR auction until the reversal of Thursday's VRRR which will be on Aug. 22, due to outflows for goods and services tax starting Aug. 21. However, the central bank will conduct a three-day auction of INR 250 billion Monday. Outflows of around INR 1.85 trillion are expected to start on Aug. 21 for GST payments, though traders said the amount could be larger. 

 

"GST will be there but people may still park at a VRRR if it comes, because there is some surplus," a dealer at private sector bank said. "But I don't think there will be any VRRR, even any overnight one, until this today's (Thursday's) one reverses."

 

OUTLOOK

* Financial markets are shut Friday for Independence Day. On Saturday, the two-day call money rate may open below the RBI's repo rate of 5.50% on low demand for funds, and thin trade.

* RBI will hold a three-day variable rate reverse repo auction for INR 250 billion at 0930-1000 IST Monday. Traders were not expecting this auction, and 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 4.70-5.60%, dealers said.

 

CALL RATE

5.10%--Thursday's close for four-day loans

5.55%--Thursday's open for four-day loans

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

 

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	THURSDAY	WEDNESDAY
Overnight	5.53	5.52
3-day	--	--
14-day	5.74	5.74
1-month	5.99	6.00
3-month	6.10	6.10

 

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India Call: Above repo as RBI holds VRRR, demand up ahead of long weekend

 

MUMBAI – The interbank call money market rates were near the Reserve Bank of India's repo rate of 5.50% ahead of the INR 2-trillion variable rate reverse repo auction. Money market rates were also high due to heightened funding needs ahead of the long weekend as the market is shut on Friday on account of Independence Day, dealers said. Demand in the call money market was mostly from primary dealerships ahead of the INR 280-billion auction of government securities, they said.  

 

At 0920 IST, the four-day call money market rate was at 5.55%. The weighted average rate was also at the same level. The rate in the triparty repo market was 5.42% and the weighted average rate was 5.40%. Traders expect rates to cool slightly later in the day, after the variable rate reverse repo auction and when the early trade rush subsides, dealers said. 

 

"There has been a rally in the market this week and the rates are mostly higher in the morning even though liquidity is still in surplus, but after the morning requirements are met, we see the rates easing down," a dealer at a state-owned bank said. "Today, the rates were expected to open higher as there is a VRRR auction and lenders will also charge more for four-day loans."

 

The RBI will hold an eight-day variable rate reverse repo auction for INR 2 trillion and traders expect the auction to be undersubscribed as market participants expect the total subscription amount around INR 1.50 trillion, as per an Informist poll. High rates in the call money market and the upcoming tax outflows are expected to restrain traders from parking funds aggressively at the auction, dealers said. The auction will reverse on Aug. 22, and outflows for goods and services tax payouts are likely to commence from Aug. 21. Traders expect the tax outflows to drain around INR 1.5 trillion to INR 1.75 trillion from the banking system. 

 

"I will see where the rates are and if I have excess funds only then I will park at VRRR auction because in the call (money market) the rate is at 5.55%," a dealer at another state-owned banks said. "All the quotes in the market are mostly from PDs and that is also for four-day tenure, but there are also limits in lending at call so those who are not able to lend there will go for VRRR." 

 

As per latest data from RBI, the central bank net absorbed INR 2.90 trillion from the banking system on Wednesday, higher than INR 2.63 trillion Tuesday. On Wednesday, two variable rate reverse repo auctions of different tenures also reversed, which cumulatively amounts to INR 1.91 trillion. Banks maintained INR 9.63 trillion as cash reserve with the central bank Wednesday, higher than the daily average requirement of INR 9.58 trillion for the current fortnight.  

 

End

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

 

Edited by Deepshikha Bhardwaj

 

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