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Informist, Saturday, Sept. 20, 2025

By Cassandra Carvalho

MUMBAI – The two-day call rate ended below the Reserve Bank of India's Standing Deposit Facility rate on Saturday nearing the end of trade. However, rates were on the higher side during the day and volumes in the call money market were higher than usual for a Saturday due to outflows for goods and services tax, dealers said. The call money market saw a turnover of INR 22.07 billion Saturday, compared with INR 12.15 billion on Sept. 6, the previous working Saturday. The last working Saturday of August saw a turnover of INR 9.56 billion in the call money market.

The two-day call money rate settled at 4.95%, down from 5.60% for three-day loans Friday. The weighted average rate ended at 5.37%, down from 5.53% Friday. The rate in the triparty repo market closed at 5.50%, with the weighted average rate at 5.33%, down from 5.40% Friday.  

Rates were on the higher side due to outflows for goods and services tax, shortly after payments for advance tax drained around INR 2.50 trillion from the systemic liquidity this week, dealers said. Outflows for goods and services tax are estimated at around INR 1.70 trillion but could be on the higher side, dealers said. As per latest data from the 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. Traders will only get to know Friday's data on Monday and some were spooked by the sharp drop in liquidity this week.    

"System liquidity is very down, it is below one lakh crore (INR 1.7 trillion)," a dealer at a state-owned bank said. "I think now it is below fifty thousand crore (INR 500 billion). Liquidity is down by around 2.5 lakh crore (INR 2.5 trillion) but advance tax could go upto 3 lakh crore (INR 3.0 trillion) and GST will be another 1.7 to 2 lakh crore (INR 1.7 trillion to INR 2.00 trillion)." 

Some dealers said the deadline to make goods and service tax payments was Saturday. The central bank post market hours Friday announced an overnight variable rate repo auction for INR 1.00 trillion at 0930-1000 IST on Monday. Traders expect this auction to be fully subscribed due to pressure on liquidity. The two VRR auctions held on Friday were poorly subscribed but that was likely due to the size and tenure of the auctions not matching with traders' positioning, dealers said. The RBI took all INR-3.90-billion bids at the INR-500-billion, three-day VRR auction, and all INR-599.67-billion bids at the INR-1-trillion, six-day VRR auction Friday.

Rates in the triparty market were also near repo due to panic borrowing, which was furthered by very few lenders in the market on a Saturday, when some traders, especially from mutual funds--who are usually on the lending side--are not at desks, dealers said. Saturdays usually see erratic rates because of the low attendance and traders preferring funding their weekend requirements on Fridays to avoid risk, they said. 

OUTLOOK

* On Monday, the one-day call money rate is likely to open near the RBI's repo rate due to demand for GST payments. 

* However, later in the day, rates may fall as the RBI will conduct an overnight variable rate repo auction for INR 1.00 trillion at 0930-1000 IST.

* During the day, the call rate is seen in the range of 4.75-5.60%, dealers said.

CALL RATE

4.95%--Saturday's close for two-day loans

5.20%--Saturday's open for two-day loans

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

End

Edited by Akul Nishant Akhoury

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