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Informist, Monday, Sept. 1, 2025

 

By Shravani Chandiwade

 

MUMBAI – The inter-bank call money market rate ended below the Reserve Bank of India's repo rate of 5.50% on ample liquidity in the banking system and a lack of major outflows, dealers said. The weighted average call rate for the day was 5.42%, near the repo rate after the RBI drained liquidity of INR 488.20 billion via a variable-rate reverse repo auction. 

 

The one-day call rate ended at 5.40% Monday up from 5.00% for two-day loans on Saturday. The call rate moved in a range of 4.75-5.50% through the day. "The weighted average rate opened high on account of a large volume trade ahead of VRRR auction, and hence it was seen up throughout the day even when rates cooled-off later", a dealer at a private sector bank said. The rates in the triparty repo market closed at 5.17%, with the weighted average at 5.28%, up from 5.17% Saturday.

 

Banks were seen actively lending in the call money market due to increased surplus liquidity in the banking system and the lack of major outflows scheduled for this week, dealers said. The surplus liquidity rose a tad to INR 2.66 trillion from INR 2.65 trillion Saturday. The liquidity surplus in the banking system rose above 1% of banks' net demand and time liabilities, which is INR 2.35 trillion as per latest data. The surplus rose due to month-end inflows from the government's salary and pension payouts.  

 

Mutual funds, which are major lenders in the triparty repo market and have not been lending actively for the past few days, started lending Monday, as the month-end redemption pressure subsided. "Mutual funds received some inflows on account of new investments as investors tend to start SIPs (Systematic Investment Plan) during start of the month", a dealer at private sector bank said. However, redemption pressures will not subside fully before Tuesday, dealers said.

 

OUTLOOK

Tuesday, the one-day call money rate may remain near the RBI's repo rate of 5.50% ahead of the VRRR expectations. 

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

 

CALL RATE

5.40%--Monday's close for one-day loans

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

5.00%--Saturday's close for two-day loans

 

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	Monday	Friday
Overnight	5.49	5.54
3-day	--	--
14-day	5.74	5.75
1-month	5.96	5.97
3-month	6.08	6.09

 

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India Call: At repo rate on good demand ahead of RBI reverse repo auction

 

The one-day interbank call money rate opened at the Reserve Bank of India's repo rate of 5.50% ahead of the central bank's three-day variable rate reverse repo auction of INR 500 billion Monday. Rates were also up as banks had parked INR 1.38 trillion with the RBI under its six-day VRRR auction Friday, which will reverse only on Thursday. However, demand for funds is expected to cool later in the session due to lack of any major scheduled outflow during the day, dealers said.

 

At 0930 IST, the one-day interbank call money market rate was 5.50% and the weighted average call rate was 5.51%. The rate in the tri-party repo market opened at 5.35% and the weighted average rate was 5.33%. Rates in the tri-party repo market opened higher as mutual funds, which are major lenders in this market, are under month-end redemption pressure. However, the TREPs rates are likely to cool later in the day, dealers said.

 

Some traders expect rates to cool later in the day as surplus liquidity has increased on account of inflows from the government's salary and pension payouts. As per latest data from the RBI, the central bank net absorbed INR 2.43 trillion from the banking system Friday, higher than INR 2.37 trillion Thursday. Meanwhile, banks increased their cash reserves with the central bank to INR 9.67 trillion Friday from INR 9.61 trillion Thursday. The daily average cash reserve requirement for the current fortnight ending Sept. 5 is INR 9.63 trillion.

 

Traders expect the INR 500-billion VRRR auction to be fully subscribed and estimate the cut-off at 5.49%. "It looks like the auction can be fully subscribed because there is enough liquidity and the rates in TREPs market are also low. So, banks can choose to park money at the auction," a dealer at a private sector bank said. 

 

Post market hours Friday, the central bank announced a three-day variable rate reverse repo auction of INR 500 billion for Monday. Traders estimate the total subscription at the RBI reverse repo auction will be INR 500 billion, as per the median in an Informist poll of eight market participants.  End

 

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

 

Edited by Deepshikha Bhardwaj

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