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Informist, Monday, Sept. 22, 2025

By Shravani Chandiwade

MUMBAI – The interbank call money rate ended near the Reserve Bank of India's Marginal Standing Facility rate of 5.75% on strong demand for funds from banks due to goods and services tax outflows. The triparty repo rate ended above the MSF rate as banks were aggressively borrowing in this market as well till 1630 IST, dealers said.

The one-day call money rate ended at 5.74%, up from 4.95% for two-day loans on Saturday. The weighted average rate ended at 5.58%, up sharply from 5.37% on Saturday. The total volume traded in the call market was INR 2.26 trillion.

Rates in the call money market were below the RBI's repo rate till 1600 IST, dealers said. Banks switched to the call market after mutual funds stopped lending in the triparty repo market, they said. "Banks tried to borrow majority of funds from TREPs," a dealer at a private sector bank said. "However, mutual funds were charging really high rates. After 1630 IST they (mutual funds) stopped lending funds, so banks had no option but to borrow in call (market)."

The triparty repo rate settled at 6.00%. The weighted average rate in the triparty repo market ended at 5.54%, above its previous close of 5.33%. Total volume in the triparty repo market was INR 4.41 trillion.

The triparty repo rate remained sharply above the Marginal Standing Facility rate of 5.75% for the most of the session as banks rushed to the triparty repo market to borrow heavily for goods and services tax outflows, dealers said. The RBI held a variable rate repo auction of INR 1 trillion early in the day, but it received bids only for INR 211.51 billion.

During the variable rate repo auction window, banks did not borrow from the central bank as the borrowing cost in the triparty repo market was lower than the minimum bidding rate of 5.51% at the auction. However, after the auction, the rates in the triparty repo market rose sharply above the RBI's repo rate of 5.50% as lenders started charging higher rates.

"Borrowers did not expect the rates (in the triparty repo market) to rise so sharply," a dealer at a state-owned bank said. "Mutual funds charged high rates to the banks as they knew the demand for funds was strong." The outflows for goods and service taxes was initially expected to drain around INR 1.8 trillion from the banking system. However, given the current liquidity in the system, they see the overall outflows related to GST payments to be more than INR 2 trillion. Latest data showed the RBI net absorbed INR 70.72 billion on Sunday.

After market hours, the central bank announced an overnight variable-rate repo auction of INR 1 trillion to be held on Tuesday between 0930 IST and 1000 IST. The auction was in line with dealers' expectations.

OUTLOOK

* On Tuesday, the one-day call money rate is likely to open near the RBI's repo rate due to demand for funds and ahead of the VRR auction 

* Later in the day, rates may cool down 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 a range of 4.80-5.80%, dealers said.

CALL RATE

5.74%--Monday's close for one-day loans

5.60%--Monday's open for one-day loans

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

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Triparty repo rates surge after poor subscription at VRR auction

MUMBAI – Call money market rates remained high and tri-party repo rates shot up after banks and primary dealerships avoided borrowing funds from the Reserve Bank of India at its overnight variable rate repo auction. Dealers said the surge in the triparty repo rate highlighted banks' limited options to manage inflows and outflows after the RBI window closed, forcing them to rely more on market borrowings.

At 1257 IST, the call money rate was at the Marginal Standing Facility rate of 5.75% while the weighted average rate was at 5.58%. However, the triparty repo rate was sharply up at 5.66%, though the weighted average repo rate in the triparty repo market remained slightly below the central bank's repo rate of 5.50% at 5.48%, as most of the participants had met their funding requirements earlier in the day.

Demand for liquidity from banks was high due to the goods and services tax outflows, which commenced on Saturday. These outflows are expected to drain around INR 1.8 trillion from the banking system by Monday. Despite the strain on liquidity, the central bank got bids for only INR 211.51 billion at its overnight, INR 1.00-trillion VRR auction on Monday.

"Post the cash reserve ratio cut, it was anticipated that even if the surplus narrowed, it would still be enough for funding needs. However, the moves in the call and tri-party repo markets suggest miscalculations by banks," a dealer at a state-owned bank said.

The RBI's latest data showed it net absorbed INR 70.72 billion on Sunday, with the proxy of the liquidity surplus at its lowest level in 2024-25 (Apr-Mar). The net liquidity absorbed was INR 89.55 billion on Saturday and INR 532.03 billion Friday. Despite this declining surplus, banks chose to arbitrage their requirements and avoided borrowing at 5.51% from the central bank. Instead, they opted to lock in overnight rates around 10 basis points lower early in the day.

"The triparty repo rate was near 5.40% when the bidding was happening. We didn't go to VRR because what if the TREPs rate fell by 20 bps during the day," a dealer at a private-sector bank said. "Anyway, for an overnight tenure it is not terrible, banks will brush it off."

Since last week, rates in the triparty repo market have moved close to the RBI's repo rate of 5.50%. The RBI held a INR 750 billion variable rate repo auction last week, but demand was poor. Traders expect the call money rate to remain above the RBI's repo rate even on Tuesday while the weighted average rate in the triparty repo rate may not rise above the repo rate of 5.50% as the strain on liquidity surplus is likely to ease, dealers said. The RBI is also expected to continue providing liquidity support if needed.  (Shravani Chandiwade)

India Call: Above RBI's repo as surplus dips to INR 0.5 tln on GST outflows

MUMBAI – The one-day interbank call money rate opened above the Reserve Bank of India's repo rate of 5.50% Monday due to firm demand for funds from banks amid outflows for goods and services tax that had likely started on Saturday, dealers said. On Monday, the central bank held an overnight variable-rate repo auction of INR 1.00 trillion from 0930 IST to 1000 IST.

As per the latest data from RBI, the net liquidity absorbed by the central bank – a proxy for the systemic liquidity surplus – stood at INR 532.03 billion on Friday, lower than INR 727.74 billion on Thursday. Amid the liquidity strain, banks continued to keep their cash balances with the RBI low. The daily average cash reserve requirement for the fortnight ended Sept. 19 was INR 9.04 trillion, while banks maintained INR 8.92 trillion on Friday.

At 0955 IST, the one-day interbank call money market rate was 5.60%, with the same weighted average level. The rate in the tri-party repo market was 5.45%, with the same weighted average level. Trade volumes in the call market were around INR 2.66 billion at 0930 IST, compared with INR 68.70 billion at the same time Friday.

Traders do not expect the INR 1.00-trillion VRR auction to be fully subscribed, as they may turn to other markets such the triparty market where borrowing rates are lower. "We'll have to see what the rates in the call and TREPs market would be around the time of auction," a dealer at a public sector bank had said before the auction. The subscription amount at the auction is seen at INR 650 billion and the cut-off rate at 5.51%, according to the average estimate of nine market participants polled by Informist. 

Outflows for goods and services tax are expected to drain around INR 1.70 trillion to INR 1.80 trillion from the banking system, dealers said. Further, Monday's settlement of the INR-360-billion gilt auction held Friday may also have driven up demand amid the persistent liquidity crunch in the banking system, dealers said. Call money rates may come down later in the day if the RBI's variable rate repo auction is well subscribed, dealers said. Meanwhile, rates in the TREPs market are likely to stay elevated on firm demand from banks, they said.  (Muskan Lodhi)  End

End

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

Edited by Ashish Shirke

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