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Informist, Monday, Sept. 15, 2025

By Srijita Bose

MUMBAI – The interbank call money rate ended sharply below the Reserve Bank of India's Standing Deposit Facility of 5.25% as demand for funds reduced during the day due to sufficient liquidity in the banking system, dealers said. Rates were near the RBI's repo rate in early trade due to advance tax payout, they said.

The one-day call money rate ended at 4.95% on Monday, the same as the three-day loans close Friday. The weighted average call rate was at 5.44%, marginally higher than 5.43% Friday. Total volume traded in the call money market was at INR  218.49 billion Monday, up from INR 209.33 billion Friday. The call rate moved in a range of 4.75–5.55% on Monday.

The drain due to the advance tax payment was likely around INR 500 billion, dealers said. However, with the release of INR 1.5 trillion into the banking system as part of the reversal of the variable rate reverse repo auction conducted on Friday, systemic liquidity was seen as comfortable, dealers said. 

"Today, the demand was not much after the advance tax outflows were done," a dealer at a state-owned bank said. "On the TREPs market, too, there was not much demand. Plus, many bank traders were absent today." 

As per the latest data from the RBI, the central bank net absorbed INR 2.66 trillion from the banking system on Sunday, marginally higher than INR 2.63 trillion Saturday. Meanwhile, banks slightly reduced their cash reserves with the central bank to INR 9.11 trillion Sunday from INR 9.16 trillion Saturday. The daily average cash reserve requirement for the fortnight ending Sept. 19 is INR 9.04 trillion.

With rates falling below the RBI's SDF in the latter half of the day, dealers expected the RBI to announce a VRRR auction for Tuesday. The RBI post-market announced a three-day VRRR auction worth INR 750 billion to be held on Tuesday.

Traders will monitor liquidity in the system before outflows from goods and service tax payments begin, expected later in the week or early next week, dealers said. The outflows due to GST payments are expected to drain INR 1.5 trillion to INR 2 trillion from the system liquidity, dealers said. 

OUTLOOK

* On Tuesday, the one-day call money rate is likely to open near the RBI's repo rate of 5.50% ahead of the three-day INR 750 billion VRRR auction Tuesday. 

* During the day, the call rate is seen in the range of 4.75-5.55%, dealers said.

CALL RATE

4.95%--Friday's close for one-day loans
5.50%--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:

India Call:Opens at RBI's repo rate as demand up before advance tax outflows

MUMBAI – The one-day interbank call money rate opened at the Reserve Bank of India's repo rate of 5.50% due to demand ahead of advance tax payout expected to start Monday, dealers said. However, rates are not expected to shoot up above the repo rate due to ample liquidity in the banking system and the reversal of the three-day variable rate reverse repo auction of INR 1.5 trillion, they said.

At 0950 IST, the one-day interbank call money market rate was 5.50%, with the weighted average level 5.49%. The rate in the tri-party repo market was 5.37% with the same weighted average rate. Trade volumes in the call market were around INR 65.99 billion at 0930 IST, compared with INR 51.38 billion at the same time Friday.

On Friday, the central bank released INR 1.7 trillion into the banking system as part of the reversal of two variable rate reverse repo auctions of varied tenures, aiding systemic liquidity. As per latest data from RBI, the RBI net absorbed INR 2.64 trillion from the banking system Friday, lower than INR 2.85 trillion Thursday. Meanwhile, banks increased their cash reserves with the central bank to INR 9.16 trillion Friday from INR 8.90 trillion Thursday. The daily average cash reserve requirement for the fortnight ending Sept. 19 is INR 9.04 trillion.

Despite the outflows for advance tax payments, which are likely to drain out around INR 500 billion of liquidity from the system, rates in the call money market are expected to cool off during the day on account of ample liquidity and reversal of the three-day variable rate reverse repo auction. However, some traders expect the call money rate to trade in the range of 5.45-5.50% with the view that the RBI will conduct a variable rate reverse repo auction later in the day. "We expect a 4-day VRRR auction and the expected amount will likely be below INR 1 trillion," a dealer at a private-sector bank said.

Banks will likely borrow funds from the TREPs market at lower rates and lend it in the call money market to take advantage of the spreads between the two markets, dealers said. Rates in the TREPs market may also rise if the RBI announces a VRRR auction. "Rates are somewhat comfortable in the TREPs market as traders aren't borrowing aggressively but that might change if the central bank announces a VRRR auction," a dealer at a public-sector bank said. Outflows due to goods and services tax payments are also expected to begin later in the month, which could have a bearing on liquidity, dealers said.  (Muskan Lodhi)

End

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

Edited by Saji George Titus

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