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Informist, Thursday, Aug. 28, 2025

 

By Srijita Bose

 

MUMBAI – The interbank call money rate ended lower than the Reserve Bank of India's Standing Deposit Facility of 5.25% on Thursday as demand for funds fell after the early rush, dealers said. However, the weighted average call rate remained near the RBI's repo rate due to demand for funds after the RBI conducted a variable rate reverse repo auction, they said.

 

The weighted average call rate ended at 5.46% Thursday, against 5.44% Tuesday. The weighted average triparty repo rate was at 5.36%, the same as Tuesday. Money markets were shut Wednesday due to Ganesh Chaturthi. The one-day call money market rate settled at 5.00%, down from the two-day close of 5.50% Tuesday. The call rate moved in the range of 4.75-5.60% Thursday. The triparty repo market rate closed at 5.25%, the same as Tuesday.

 

"There was not much demand in the later half of the day," a dealer at a private sector bank said. "Though in TREPS (triparty repo), the rate remain slightly up because of mutual funds." 

 

In the triparty repo market, demand from mutual funds was firm due to their month-end redemption pressures, dealers said. Rates in the call money market were also up due to the RBI's overnight VRRR auction of INR 750 billion, where banks and primary dealers parked INR 495.15 billion with the central bank. Banks have already locked up INR 757.81 billion with the central bank under its seven-day variable rate reverse repo auction which is due for reversal Friday, which kept rates up.

 

However, later in the day, rates fell due to inflows from the government's month-end spending, dealers said. The government's month-end inflows, in the form of salary and pension payouts, commenced Tuesday in Maharashtra and Kerala on account of holidays in these states for Ganesh Chaturthi and Onam, respectively. Traders have pegged the inflows at around INR 350 billion to INR 400 billion Tuesday, while the total inflows are expected to be around INR 1.5 trillion. However, the major corpus of the inflows is expected to come into the banking system by next week, dealers said. 

 

"There was some month-end inflows today, so rates fell later in the day," a dealer at a state-owned bank said. "But there should be another VRRR auction, so the fall was not much as liqudity (surplus) is still below 1% of NDTL (banks' net demand and time liabilities)."

 

As per the latest RBI data, the central bank net absorbed INR 1.83 trillion from the banking system Wednesday, a tad lower than INR 1.91 trillion Tuesday. Banks increased their cash reserves with the central bank to INR 9.93 trillion Wednesday from INR 9.83 trillion Tuesday. Banks have maintained their cash reserves higher than the daily average requirement of INR 9.63 trillion for the current fortnight ending Sept. 5.

 

Traders also expected the RBI to announce another VRRR auction of around INR 1.5 trillion to INR 2 trillion after market hours, dealers said. After market hours, the RBI said it would conduct a six-day VRRR auction of INR 1.5 trillion on Friday. 

 

OUTLOOK

* On Friday, the three-day call money rate may open above the RBI's repo rate of 5.50% on demand for funds. 

* RBI to hold a six-day VRRR auction for INR 1.5 trillion 0930-1000 IST Friday.  

* During the day, the call rate is seen in the range of 4.70-5.60%, dealers said.

 

CALL RATE

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

5.52%--Thursday's open for one-day loans

5.50%--Tuesday's close for two-day loans

 

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	THURSDAY	TUESDAY
Overnight	5.52	5.49
3-day	--	--
14-day	5.75	5.75
1-month	5.97	5.97
3-month	6.10	6.09

 

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India Call: Above repo on VRRR; rate seen cooling on month-end inflows

 

MUMBAI – The interbank call money market rate opened above the Reserve Bank Of India's repo rate of 5.50% Thursday as the Reserve Bank of India holds an overnight variable rate reverse repo auction of INR 750 billion. Money market rates were also higher in early trade owing to strong funding demand from primary dealerships, dealers said. 

 

On Thursday, the one-day interbank call money rate opened at 5.52%. The weighted average rate was also at the same level. "Rates are high during morning, mainly because of the VRRR auction and the early funding rush," a dealer at a private sector bank said. "In the second half, rates will cool down as there is ample liquidity surplus in the banking system with no major outflows lined up for this week." Banks are seen active on the lending front in the call money market, dealers said. 

 

At 0930 IST, the rate in the triparty repo market was 5.43% and the weighted average rate was at 5.43%. In the tri-party repo market, mutual funds, which are major lenders, are under month-end redemption pressure, which is expected to keep rates slightly elevated, dealers said.  

 

Inflows from the government's month-end spending, in the form of salary and pension payouts, commenced Tuesday in Maharashtra and Kerala on account of holidays in these states for Ganesh Chaturthi and Onam, respectively. Traders have pegged the inflows at around INR 350 billion to INR 400 billion Tuesday, while the total inflows are expected to be around INR 1.5 trillion. The major corpus of the inflows is expected to come into the banking system by next week, dealers said.

 

As per the latest RBI data, the central bank net absorbed INR 1.91 trillion from the banking system Tuesday, a tad higher than INR 1.80 trillion Monday. Banks also increased their cash reserves with the central bank to INR 9.83 trillion Tuesday from INR 9.63 trillion Monday. Banks have maintained their cash reserves higher than the daily average requirement of INR 9.63 trillion for the current fortnight ending Sept. 5.

 

Post market hours on Tuesday, the central bank announced an overnight variable rate reverse repo auction for Thursday. Most traders were not expecting the central bank to announce an auction as the weighted average rate in the call money market was around 5.40% this week. Moreover, banks have also locked up INR 757.81 billion with the central bank under its seven-day variable rate reverse repo auction which is due for reversal Friday. 

 

"This (variable rate reverse repo auction) is a slight surprise as rates were not that low this week and liquidity is also just enough right now," a dealer at a state-owned bank said. "Month-end inflows could be a reason as the surplus has risen Tuesday, but we will get a clear picture once the liquidity data for Wednesday comes."

 

Traders expect the auction to be undersubscribed, and they peg the total subscription amount at around INR 600 billion, as per the median in an Informist poll of seven market participants. "Full subscription looks slightly difficult right now as the call money market rate is above 5.50%. So, some banks might prefer to lend there instead of the auction," a dealer at a private sector bank said.  (Shravani Chandiwade)

End

 

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

 

Edited by Avishek Dutta

 

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