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Informist, Monday, Aug. 25, 2025

 

By Srijita Bose

 

MUMBAI – The interbank call money rate ended sharply below the Reserve Bank of India's Standing Deposit Facility on a lack of major outflows near the end of the day, dealers said. Rates were higher in early trade, with the weighted average call rate near the RBI's repo rate due to rush on the account of Goods and Service Tax outflows, they said. 

 

The weighted average call rate ended at 5.45% Monday, against 5.51% Friday. The weighted average triparty repo rate was also higher than the repo rate at 5.39%, against 5.51% Friday. The one-day call money market rate settled at 4.95%, the same as the three-day call close Friday. The call rate moved in the range of 4.00-5.50% Monday. The triparty repo market rate closed at 5.18%, down from 5.25% Friday.

 

"A chunk of the GST outflows is nearly done, so rates fell towards the end of the day," a dealer at a private sector bank said. "I don't see much of change in rates tomorrow, and by Friday some month-end inflows may start." The government's month-end spending in the form of salary and pension payout is likely to commence by Aug. 30 and is expected to lead to an inflow of around INR 1.50 trillion to INR 1.85 trillion, dealers said.

 

With INR 757.81 billion worth of funds parked with the RBI through variable rate reverse repo auction Friday, demand for funds in early trade was high by primary dealerships and small co-operative banks, dealers said. Demand from mutual funds for funds was also there in the triparty repo market, they said. Market participants expect rates in the triparty repo to rise by the end of the week, due to redemption pressures of mutual funds near the end of the month, dealers said. 

 

Surplus liquidity in the banking system, as indicated by the central bank's net absorption of funds, was at INR 1.64 trillion on Sunday, lower INR 2.19 trillion on Friday. Banks maintained slightly higher cash balance with the central bank Sunday at INR 9.94 trillion, more than INR 9.40 trillion Friday. The liquidity surplus has fallen below the 1% of banks' net demand and time liabilities, which is at INR 2.35 trillion, according to the latest data. While announcing the April monetary policy, RBI Governor Sanjay Malhotra had identified the banking system liquidity in excess of 1% of banks' net demand and time liabilities as a comfortable level for policy rate-cut transmission.

 

However, market participants do not expect a variable rate repo auction by the RBI to boost the liquidity surplus as major GST outflows for the month are nearly seen done, despite the extension in deadline for filing GST returns to Aug. 27 for businesses in some parts of Maharashtra. They said that the RBI will only consider a fine tuning variable rate repo auction if call rates rise near the Marginal Standing Facility of the RBI at 5.75%.  

 

"The liquidity is well below 1% of NDTL, but RBI will only look at overnight rates to take a call on infusing more liquidity," a dealer at a state-owned bank said.

 

OUTLOOK

* On Tuesday, the one-day call money rate may open near the RBI's repo rate of 5.50% on demand for funds due to GST outflows.

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

 

CALL RATE

4.95%--Monday's close for one-day loans

5.45%--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	5.55	5.57
3-day	--	--
14-day	5.75	5.77
1-month	6.00	6.00
3-month	6.10	6.10

 

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India Call: Near repo rate as surplus liquidity narrows post GST outflows

 

MUMBAI – The rate in the interbank call money market was near the Reserve Bank of India's repo rate of 5.50% as the surplus liquidity in the banking system narrowed post outflows for goods and services tax, dealers said. Rates were also higher due to firm demand from primary dealerships in early trade and banks' reluctance to lend aggressively after having parked funds with the central bank under its variable rate reverse repo auction Friday, they said. Triparty repo market rates are also expected to remain higher as mutual funds are likely to face some cash crunch on account of their month-end redemption pressure. 

 

At 0920 IST, the one-day call money market rate was at 5.48%. The weighted average rate was also at the same level. The rate in the triparty repo market was 5.39% and the weighted average triparty repo rate was 5.38%. Some traders expect the rates to ease later in the day due to the absence of significant scheduled outflows. "There will be gilts payment but other than that, nothing very heavy is there for outflows," a dealer at a private sector bank said. Payment of government bonds which were auctioned Friday will drain INR 360 billion from the banking system Monday.  

 

Surplus liquidity in the banking system, as indicated by the central bank's net absorption of funds, was at INR 2.19 trillion on Friday, largely unchanged from INR 2.17 trillion on Thursday. Banks maintained slightly higher cash balance with the central bank Friday at INR 9.40 trillion, more than INR 9.29 trillion Thursday. The mandated average daily cash reserve requirement for the reporting fortnight which ended Friday was INR 9.58 trillion. Of the total surplus in the banking system, banks have locked up INR 757.81 billion with the RBI for seven days Friday. 

 

Traders do not expect the central bank to conduct another variable rate reverse repo auction this week until the reversal of the seven-day auction due to tight systemic liquidity surplus. Money market rates are expected to remain slightly elevated. However, most traders are of the view that the central bank is unlikely to conduct a variable rate repo auction unless the rates spike to the RBI's Marginal Standing Facility rate of 5.75%, dealers said. 

 

"There will be pressure but right now, surplus is still comfortable and there will be month-end spending too, so this pressure is for a temporary period," a dealer at a state-owned bank said. The government's month-end spending in the form of salary and pension payout is likely to commence by Aug. 30 and is expected to lead to an inflow of around INR 1.50 trillion to INR 1.85 trillion, dealers said.  (Vidhushi RajPurohit)

End

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

 

Edited by Deepshikha Bhardwaj

 

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