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Informist, Wednesday, Sept. 17, 2025

By Shravani Chandiwade  

MUMBAI – The tri-party repo rate remained elevated throughout the trading session on Wednesday due to firm demand for funds from the banks, dealers said. However, the one-day interbank call money rate ended below the Reserve Bank of India's Standing Deposit Facility rate of 5.25%.

On Wednesday, the one-day call money rate ended at 5.00%, down from its previous close of 5.50%. The weighted average call rate ended at 5.47%, slightly higher than 5.43% on Tuesday. The call rate moved in a band of 4.75–5.65%. The total volume traded in the call money market was INR 230.60 billion.

The call money rate opened at the repo rate of 5.50% on strong demand for funds from banks and primary dealerships, dealers said. However, traders had already anticipated that the call rate would settle below the repo rate around closing, as most of the volume had moved to the triparty repo market.

The triparty repo rate ended at 5.25% on Wednesday. The weighted average triparty repo rate was at 5.44%, up from 5.37% on Tuesday. Triparty repo rate remained elevated for the majority of the session as banks flocked to the market to borrow funds after poor subscription at the variable-rate repo auction held on Tuesday and ahead of the goods and services tax payouts, dealers said. On Wednesday, the volume traded in the triparty repo market totalled INR 4.38 trillion.

"There was no clear reason for the variable rate repo auction held by the central bank on Tuesday... because the banking system was sitting on a comfortable liquidity surplus. However, considering the current liquidity surplus, we now see the underlying reasoning behind the auction held by the central bank," a dealer at a state-owned bank said.

As per the latest data from the RBI, the net liquidity absorbed by the central bank – a proxy for the systemic liquidity surplus – was INR 705.79 billion Tuesday, sharply down from INR 1.90 trillion Monday. This was the lowest liquidity level since Apr. 22. 

There are no firm estimates as to how much of the funds have been drained from the banking system on account of advance tax outflows and whether the current pressure on the liquidity surplus is solely because of those outflows, dealers said. Moreover, traders anticipate a variable rate repo auction before the outflows for goods and services tax commence on Saturday.

The GST outflows are expected to drain liquidity of around INR 1.8 trillion from the banking system.

OUTLOOK

* On Thursday, the one-day call money rate is likely to open below the RBI's repo rate on low demand from banks

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

CALL RATE

5.00%--Wednesday's close for one-day loans
5.50%--Wednesday's open for one-day loans

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

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: At RBI's repo as liquidity surplus dips to lowest since Apr 22

MUMBAI – The one-day interbank call money rate opened at the Reserve Bank of India's repo rate of 5.50% Wednesday as the liquidity surplus in the banking system fell sharply below INR 1 trillion Tuesday after advance tax payouts, dealers said. As per latest data from RBI, the net liquidity absorbed by the central bank--a proxy for the systemic liquidity surplus--stood at INR 705.79 billion on Tuesday, the lowest since Apr. 22. It is sharply lower than INR 1.90 trillion Monday.

At 0949 IST, the one-day interbank call money market rate was 5.46%, with the weighted average level at 5.50%. The rate in the tri-party repo market was 5.45% with the weighted average rate at 5.39%. Trade volumes in the call market were around INR 51.24 billion at 0930 IST, compared with INR 83.44 billion at the same time Tuesday. 

On Tuesday, the central bank held a three-day variable rate repo auction of INR 750.00 billion which was poorly subscribed at just INR 5.85 billion, with the cut-off at 5.51%. Instead, banks borrowed funds actively in the TREPs market Tuesday due to a lower borrowing rate of 5.37%--which was the weighted average triparty repo rate Tuesday--against the lowest bid of 5.51% at the auction. 

Meanwhile, banks reduced their cash reserves with the central bank to INR 8.72 trillion on Tuesday from INR 9.11 trillion Monday. The daily average cash reserve requirement for the fortnight ending Sept. 19 is INR 9.04 trillion.

Rates in the call money market may come down later in the day as banks are likely to refrain from aggressive lending with the Jul-Sept quarter-end approaching, dealers said. In the TREPs market, rates are seen in the range of 5.38-5.45% on likely funding needs from banks and no anticipation of a variable-rate repo auction, but are unlikely to rise above the central bank's repo rate, according to dealers. 

Some traders do not expect banks to borrow aggresively in the TREPs market despite a big crunch in the systemic liquidity surplus. "As of now, there are no major outflows until Sept. 20 for GST (goods and services tax) outflows so banks don't need much funds," a dealer at a private sector bank said. "Though, there are some IPOs (initial public offerings) that banks will go for, but that's about it," the dealer 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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