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Informist, Thursday, Sept. 18, 2025

By Shravani Chandiwade

MUMBAI – The one-day interbank call money rate Thursday ended below the Standing Deposit Facility rate of 5.25% because of a single trade at 4.95% towards the close of the session. However, the weighted average call rate was above the repo rate on firm demand for funds from primary dealerships and on reduced liquidity surplus, dealers said.

The interbank call money rate ended at 4.95%, down from 5.00% Wednesday. The weighted average rate in the call market ended at 5.55% and the total volume traded was INR 221.12 billion, down from INR 230.60 billion Wednesday. There was not much activity in the call money market as banks were neither significantly active on the borrowing nor on the lending front, dealers said. The call rate moved in a range of 4.75-5.65%.

The triparty repo rate ended at 5.30%. The weighted average triparty repo rate was high for most of the session and ended at 5.48% as banks borrowed aggressively ahead of the goods and services tax outflows that begin Saturday, dealers said. "Mutual funds were seen charging high rates to banks because demand for funds was strong," a dealer at a state-owned bank said.

As per latest data, the net liquidity absorbed by the Reserve Bank of India – a proxy for the systemic liquidity surplus – was INR 637.45 billion Wednesday, lower than INR 705.79 billion Tuesday. The systemic liquidity has dropped below INR 1 trillion and is expected to remain under pressure due to GST outflows, the dealer said.

"The cause for the pressure on the liquidity surplus is very frankly not clear. However, it is evident that advance tax payouts impacted the systemic liquidity more than estimated," a dealer at the state-owned bank said. Traders had initially expected the outflows on account of advance tax payments to be around INR 500 billion, dealers said.

Given the fall in liquidity surplus in the banking system, traders had anticipated another variable-rate repo auction of INR 1.00 trillion. "As it is reporting Friday, banks need funds to keep up with their CRR (cash reserve ratio) requirement...," a dealer at another state-owned bank said. "Hence, in order to avoid default on CRR, another VRR is expected."

Post market hours, the central bank announced a six-day variable rate repo auction of INR 1 trillion to be held on Friday.

OUTLOOK

* On Friday, the three-day call money rate is likely to open near the RBI's repo rate ahead of the VRR auction.

* During the day, the call rate is seen in a range of 4.80-5.75%, dealers said.

CALL RATE

4.95%--Thursday's close for one-day loans
5.60%--Thursday's open for one-day loans

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

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Above RBI's repo as liquidity surplus dips on advance tax payouts

The one-day interbank call money rate opened above the Reserve Bank of India's repo rate of 5.50% Thursday as the liquidity surplus in the banking system plunged further below INR 1 trillion Wednesday due to larger-than-expected 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 637.45 billion on Wednesday, the lowest since Apr. 22 and lower than INR 705.79 billion Tuesday. At around 0950 IST, the RBI said it would conduct an overnight variable rate repo auction for INR 250 billion from 1015 IST to 1045 IST. Traders expected such an announcement, since money market rates shot above the RBI's repo rate both Wednesday and Thursday. However, the quantum was smaller than expected. 

"We expect a VRR of INR 750 billion to INR 1 trillion if the rates go further up," a dealer at a private sector bank had said before the announcement. 

At 0940 IST, the one-day interbank call money market rate was 5.62%, with the weighted average level 5.61%. The rate in the tri-party repo market was 5.53% with the weighted average level 5.52%. Trade volumes in the call market were around INR 80.19 billion at 0930 IST, compared with INR 51.24 billion at the same time Wednesday.

The outflows for advance tax payments likely exceeded traders' expectations and led to the big liquidity crunch in the banking system, dealers said. "We were expecting the outflows to be around INR 3.1 trillion, but it could be around INR 4 trillion," a dealer at a public sector bank said.

Traders had expected call money rates to rise further to 6.70-75% during the day, some dealers said. However, the VRR auction may limit the rise in rates and some dealers believe call rates may come down later in the day as banks are unlikely to lend aggressively in the call money market due to outflows of goods and services tax. 

Outflows due to goods and services tax payments are expected to begin by end of this week, while some dealers said the outflows have already begun. The expected quantum is around INR 1.8 trillion to INR 2 trillion, dealers said.

Meanwhile, banks kept their cash reserves with the central bank at INR 8.72 trillion Wednesday, the same as on Tuesday. The daily average cash reserve requirement for the fortnight ending Sept. 19 is INR 9.04 trillion.  (Muskan Lodhi)  

End

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

Edited by Ashish Shirke

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