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Informist, Tuesday, Sept. 2, 2025

By Shravani Chandiwade

MUMBAI – The inter-bank call money market rate ended below the Reserve Bank of India's Standing Deposit Facility rate of 5.25% as surplus liquidity in the banking system widened post month-end inflows from government payouts of salary and pensions and lack of major outflows scheduled during the week, dealers said. Weighted average rates in the money market also cooled as mutual funds were also active in the market as the month-end redemption pressure ebbed, they said.

The one-day call money market rate ended at 5.24% Tuesday, down from 5.40% Monday. The call rate remained below the RBI's repo rate of 5.50% throughout the day, and was in the band of 4.75-5.45%. The money market rate opened near the repo rate at 5.45% majorly because banks had parked a cumulative sum of INR 1.9 trillion with the central bank under its variable rate reverse repo auctions of different tenures, dealers said. 

In the early trading hour, demand for funds was firm from primary dealerships. However, later in the trading session, demand fell on comfortable systemic liquidity, dealers said. The weighted average call rate ended at 5.39% Tuesday, down from 5.42% Monday. As per latest data from RBI, the central bank net absorbed INR 2.90 trillion Monday, higher than INR 2.66 trillion Sunday.

The surplus liquidity is expected to widen further on the back of a cut in banks' cash reserve ratio which will be carried out in four equal tranches with effect from the fortnight beginning Sept. 6. The RBI cut the cash reserve ratio by 100 basis points to 3% of banks' net demand, and time liabilities, Governor Sanjay Malhotra had said in the June Monetary Policy Committee's outcome. The complete CRR reduction is expected to infuse liquidity of around INR 2.5 trillion into the banking system. 

The tri-party repo market rate also ended lower at 5.10% Tuesday from 5.17% Monday. "Individuals have received their salary payments for the August month, hence many are seen investing in systematic investment plan schemes," a dealer at a private sector bank said. "MFs are thus sitting on excess cash, and TREPs rate is also low." Some traders expect the RBI to hold a short-tenure variable rate reverse repo auction on Wednesday if rates in the money market are sharply below the repo rate. 

OUTLOOK

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

* During the day, the one-day call rate is seen in the range of 4.75-5.50%, dealers said.

CALL RATE

5.24%-- Tuesday's close for one-day loans

5.45%-- Tuesday's open for one-day loans

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

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Near RBI's repo on demand; rates may fall on lack of outflows

The interbank call money rate was near the Reserve Bank of India's repo rate on demand for funds from bank as they have parked INR 1.9 trillion of liquidity with the central bank through variable reverse rate repo auctions, dealers said. Rates are likely to fall within the day due to lack of major outflows, they said. 

At 0930 IST, the one-day interbank call money market rate was 5.40% and the weighted average call rate was 5.44%. The rate in the tri-party repo market opened at 5.30% and the weighted average tri-party repo rate was 5.28%. Trade volumes in the call market were around INR 73.61 billion at 0930 IST, compared with INR 57.65 billion at the same time Monday. 

Some traders expect rates to cool later in the day as surplus liquidity has increased further on account of inflows from the government's salary and pension payouts. As per the latest data from the RBI, the central bank net absorbed INR 2.90 trillion from the banking system Monday, higher than INR 2.66 trillion Sunday. Meanwhile, banks reduced their cash reserves with the central bank to INR 9.57 trillion Monday from INR 9.61 trillion Sunday. The daily average cash reserve requirement for the fortnight ending Friday is INR 9.63 trillion.

"Rates will come down. This is just the early trade rush," a dealer at a private sector bank said. "We will also have flows due starting this week with the cash reserve ratio cut but we will have to see how much of that will be offset because of the RBI's short dollar book which will mature this month." Until September-end, data from the RBI showed net short forward dollar positions of the central bank in the foreign exchange market amounted to $11.85 billion.

The RBI cut the cash reserve ratio by 100 basis points to 3% of banks' net demand, and time liabilities, Governor Sanjay Malhotra had said in the June Monetary Policy Committee's outcome. The reduction in cash reserve ratio. which will be carried out in four equal tranches with effect from the fortnights beginning Sept. 6, Oct. 4, Nov. 1, and Nov. 29, is expected to infuse liquidity to the tune of INR 2.5 trillion into the banking system.  End

Edited by Avishek Dutta

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