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Informist, Friday, Aug. 29, 2025

By Srijita Bose

MUMBAI – The three-day interbank call money rate ended near the Reserve Bank of India's repo rate on demand from some banks for funds ahead of the weekend, dealers said. The weighted average call rate was also up at the repo rate after the RBI drained liquidity through variable rate reverse repo auction and on demand from mutual funds, they said. 

The weighted average call rate ended at 5.50% Friday, against 5.46% Thursday. The weighted average triparty repo rate was at 5.40%, higher than 5.36% Thursday. The three-day call money market rate settled at 5.45%, up from the one-day close of 5.00% Thursday. The call rate moved in the range of 4.85-5.55% Friday. The triparty repo market rate closed at 5.35%, higher than 5.25% Thursday.

"There was some demand because of the weekend," a dealer at a private sector bank said. "Volumes are more today and demand from MFs (mutual funds) is also good."

Demand for funds from mutual funds increased due to their redemption pressures near the month end, dealers said. On other hand, with INR 1.38 trillion parked by banks and primary dealers with the central bank through Friday's six-day VRRR auction, rates remained high, they said. 

Rates had fallen for sometime in the second half of the day as surplus liquidity widened on account of inflows from the government's salary and pension payouts. Traders have pegged the total month-end inflows into the banking system at around INR 1.50 trillion. 

As per latest data from the RBI, the central bank net absorbed INR 2.37 trillion from the banking system Thursday, higher than INR 1.83 trillion Wednesday. The liquidity surplus rose above 1% of banks' net demand and time liabilities, which was at INR 2.35 trillion as per the latest data. Meanwhile, banks reduced their cash reserves with the central bank to INR 9.61 trillion Thursday from INR 9.93 trillion Wednesday. The daily average cash reserve requirement for the current fortnight ending Sept. 5 is at INR 9.63 trillion. Liquidity also improved with the release of a cumulative sum of INR 1.25 trillion into the banking system with the reversal of the two VRRR auction conducted earlier. 

"Rates had come down because liquidity is up," a dealer at a state-owned bank said. "Going forward, the liquidity will improve further as month-end inflows increase and then we will have the CRR (cash reserve ratio) cut as well."

Meanwhile, post market hours, the RBI said it will conduct a three-day VRRR auction Monday for INR 500 billion. Traders said that the auction go sail through with the government's month-end inflows expected to improve liquidity surplus in the system. 

OUTLOOK

* On Saturday, the two-day call money rate may remain below the RBI's repo rate of 5.50% on low demand for funds. 

* As is the case on Saturday, trading volumes may be muted.  

* During the day, the two-day call rate is seen in the range of 4.65-5.50%, dealers said.

CALL RATE

5.45%--Friday's close for three-day loans

5.55%--Friday's open for three-day loans

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

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Above repo rate on 6-day VRRR, month-end funding needs of banks

MUMBAI – The three-day call money market rate opened above the Reserve Bank of India's repo rate of 5.50% ahead of the central bank's six-day variable rate reverse repo auction of INR 1.50 trillion Friday. Rates in the money market were also up on account of firm demand for funds from banks to meet their month-end needs, dealers said. Strong funding requirements from primary dealerships ahead of the INR 320-billion government securities auction also led the rates higher, they said. 

On Friday, the three-day interbank call money market rate opened at 5.55%. The weighted average call rate was also at the same level. The rate in the tri-party repo market opened at 5.50% and the weighted average rate was at 5.40%, as of 0930 IST. Rates in the tri-party repo market opened at higher levels on account of fewer creditors in the market as mutual funds, which are the major lenders, are facing month-end redemption pressure, dealers said.

Some traders expect rates in the money market to cool later on Friday as surplus liquidity has widened on account of inflows from the government's salary and pension payouts. Traders have pegged the total month-end inflows into the banking system at around INR 1.50 trillion. As per latest data from the RBI, the central bank net absorbed INR 2.37 trillion from the banking system Thursday, higher than INR 1.83 trillion Wednesday. Meanwhile, banks reduced their cash reserves with the central bank to INR 9.61 trillion Thursday from INR 9.93 trillion Wednesday. The daily average cash reserve requirement for the current fortnight ending Sept. 5 is at INR 9.63 trillion.

Despite the higher surplus, traders expect the INR 1.50-trillion VRRR auction to be undersubscribed on account of higher rates in the money market. "Banks will prefer to lend funds for three-day in the call market at high(er) rates and not park them under VRRR for six days," a dealer at a private sector bank said.

Post market hours on Thursday, the central bank announced a six-day variable rate reverse repo auction of INR 1.5 trillion for Friday. Traders estimated the total subscription amount at around INR 1.28 trillion, as per the median in an Informist poll of eight market participants.

"Surplus liquidity has surely increased in the market, but banks would prefer to keep the majority of funds with themselves as it is the end of the month and there will be some credit-disbursal requirements," a dealer at a private sector bank said.

Some traders also reasoned that banks would most likely only roll over the quantum from the previous two VRRR auctions that are due for reversal Friday. Reversal of the auctions will release a cumulative sum of INR 1.25 trillion into the banking system.  (Shravani Chandiwade)

End

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

Edited by Akul Nishant Akhoury

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