More Stories

Informist, Friday, Sept. 19, 2025

By Srijita Bose 

MUMBAI – The three-day interbank call money rate ended higher than the Reserve Bank of India's repo rate of 5.50% Friday due to demand for funds on account of reporting Friday and ahead of outflows for payment of Goods and Services Tax, dealers said. Further, the liquidity surplus in the banking system remained below INR 1 trillion Thursday, which also kept the weighted average call rate above the repo rate, they said.

The call rate ended at 5.60%, sharply higher than 4.95% Thursday. The weighted average rate ended at 5.54%, marginally lower than 5.55% Thursday. The total volume traded was INR 192.05 billion, down from INR 221.12 billion Thursday. The three-day call rate moved within a range of 4.85-5.60% during the day.

Trade volume in the call money market was lower as banks met their borrowing needs from the tri-party repo market at lower rates, dealers said. Most banks had already met their borrowing needs on Thursday, and refrained from borrowing Friday as the call rate shot up above the repo rate, they said. The triparty repo rate ended at 5.20%, lower than 5.30% Thursday. The weighted average triparty repo rate ended at 5.40%, lower than 5.48% Thursday.

"Most people had already borrowed yesterday so today though rates were up, volumes were not as much there," a dealer at a state-owned bank said. "The advance tax outflows are finally done but pressure will remain next week also because of the GST outflows."

However, demand from smaller cooperative banks and primary dealers was seen in the call market during the day, dealers said. Market participants borrowed ahead of the GST outflows, dealers said. The expected quantum of GST outflows is INR 1.8 trillion to INR 2.0 trillion, they said.

Meanwhile, subscription was poor at the two variable rate repo auctions conducted by the RBI Friday. Market participants subscribed only half of the INR 1 trillion, six-day VRR auction and only INR 3.90 billion of the INR 500 billion, three-day auction conducted later. "What people really needed is a three-day auction instead of a six-day one, so the timing was really off. And you are getting better rates in TREPs and mutual funds are sitting on some cash," a dealer at a private sector bank said. "No one was expecting a second VRR auction so whoever needed money had already borrowed in the first auction."

As per latest data, the net liquidity absorbed by the RBI – a proxy for the systemic liquidity surplus – was INR 727.74 billion on Thursday, higher than INR 637.45 billion on Wednesday. Given the fall in liquidity surplus in the banking system below INR 1 trillion, some traders had anticipated another variable-rate repo auction of INR 1 trillion. Post market hours, the RBI Friday announced an overnight variable rate repo auction of INR 1 trillion to be held on Monday.

OUTLOOK

* On Saturday, the two-day call money rate is likely to open near the RBI's repo rate due to demand for GST payments. Volumes may remain low, as is usual on Saturdays, as market participants have already accounted for the outflows this week. 

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

CALL RATE

5.60%--Friday's close for three-day loans
5.58%--Friday's open for three-day loans

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

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Above RBI's repo rate on firm demand ahead of GST outflows

MUMBAI – The three-day interbank call money rate opened above the Reserve Bank of India's repo rate of 5.50% Friday on firm demand for funds form banks due to reporting Friday requirements and outflows for goods and services tax starting Saturday, dealers said. Further, the liquidity surplus in the banking system remained below INR 1 trillion Thursday, likely due to lack of large scheduled inflows after advance tax payments, they said. On Friday, the central bank will conduct a six-day variable rate repo auction of INR 1 trillion from 0930 IST to 1000 IST.

As per latest data from RBI, the net liquidity absorbed by the central bank – a proxy for the systemic liquidity surplus – stood at INR 727.74 billion on Thursday, higher than INR 637.45 billion on Wednesday. Amid the liquidity strain, banks continued to keep their cash balances with the RBI low, having maintained the reserve ratio higher than required earlier in the fortnight. The daily average cash reserve requirement for the fortnight ending Sept. 19 is INR 9.04 trillion, while banks maintained INR 8.70 trillion on Thursday.

At 0945 IST, the three-day interbank call money market rate was 5.59%, with the same weighted average level. The rate in the tri-party repo market was 5.47%, with the weighted average level at 5.46%. Trade volumes in the call market were around INR 68.70 billion at 0930 IST, compared with INR 80.19 billion at the same time Thursday.

Call money rates may come down later in the day as the early trading rush subsides and because of the variable rate auction by the RBI, which lends liquidity support. However, rates in the TREPs are expected to remain in the range of 5.42-5.48% on strong demand for funds due to reporting Friday requirements and outflows, dealers said. Traders were of the view that borrowing in the TREPs market at 5.47-5.48% levels would be more lucrative than borrowing from the RBI for six days at 5.51%, a dealer at a state-owned bank said. 

However, some traders expect rates to rely on the amount subscribed at the auction. "The TREPs rates may cool off if the auction goes well but the fall may be limited because the liquidity crunch still persists," the dealer said. The subscription is seen at INR 760 billion and the cut-off rate at 5.51%, as per an Informist poll of nine market participants. 

Some traders said outflows for goods and services taxes will dent market liquidity Friday, while others said the outflows had already begun. The expected quantum is around INR 1.8 trillion to INR 2 trillion, they said.  (Muskan Lodhi)

End

With inputs from Shravani Chandiwade

Edited by Ashish Shirke

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2025. All rights reserved.