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Informist, Thursday, Aug. 21, 2025

 

By Kabir Sharma

 

MUMBAI – Weighted average rates in the money market climbed higher than the Reserve Bank of India's repo rate of 5.50% due to increased demand for funds on account of outflows for goods and services tax payouts, dealers said. The borrowing rates remained elevated despite the central bank's overnight variable rate repo auction of INR 500 billion owing to less lenders in the market, they said. Most banks were not seen on the lending front as they had parked INR 1.83 trillion in the RBI's variable rate reverse repo auctions, scheduled to reverse on Friday. 

 

"GST outflows were more than what was expected, causing rates to shoot up. Due to the extension, we were seeing some slowdown in flows, but it was definitely more than what we were expecting," a dealer at a state-owned bank said. A total of INR 1.75 trillion to INR 1.85 trillion is expected to flow from the system for GST outflows, dealers said. 

 

The weighted average call rate ended at 5.52% on Thursday, against the close of 5.47% on Wednesday. The weighted average triparty repo rate surged sharply to 5.55% on Thursday from 5.40% on Wednesday. The one-day call money market rate settled at 5.05%, compared with 5.47% Wednesday. The call rate moved in the range of 4.75-5.75% Thursday. The triparty repo market rate closed at 5.60%, from 5.61% Wednesday. 

 

The extension of the deadline for filing GST returns to Aug. 27 for businesses in some parts of Maharashtra was expected to keep rates from shooting sharply higher in the day, but the outflows were near normal which kept the pressure on the rates and pushed them higher, dealers said. Multiple parts of the western state such as Mumbai, Thane, Raigad, Palghar, and nearby districts have been disrupted due to extremely heavy rainfall. According to a notification by the finance ministry, companies from these regions are permitted to file GST returns by Aug. 27. The last date for filing GST returns for July for businesses elsewhere in India was Aug. 20.

 

Due to the optimism around the delay in GST outflows, market participants did not actively subscribe in the variable rate repo auction conducted by the central bank earlier on Thursday, dealers said. The RBI took all INR 310.25 bln bids at the overnight VRR auction against the notified amount of INR 500 billion. 

 

Rates in the money market also inched up as there were less lenders in the market on Thursday, dealers said. Mutual funds had some redemption pressure and banks were short of funds as they had parked INR 1.83 trillion at the RBI's variable rate repo auctions, to be reversed on Friday. The central bank had annouced another variable rate repo auction on Friday for INR 1.25 trillion for a tenure of seven days.   

 

OUTLOOK

* On Friday, the three-day call money rate may open above the RBI's repo rate of 5.50% on demand for funds due to GST outflows and because it will be a reporting Friday. 

* RBI will hold a seven day variable rate reverse repo auction for INR 1.25 trillion at 0930-1000 IST Friday. 

* During the day, the call rate is seen in the range of 4.80-5.70%, dealers said.

 

CALL RATE

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

5.50%--Thurday's open for one-day loans

5.47%--Wednesday's close for one-day loans

 

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	THURSDAY	WEDNESDAY
Overnight	5.55	5.52
3-day	--	--
14-day	5.75	5.74
1-month	6.00	6.00
3-month	6.10	6.10

 

End

 

Edited by Akul Nishant Akhoury

 

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