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Informist, Wednesday, Sept. 24, 2025

By Shravani Chandiwade

MUMBAI – The one-day interbank call money rate settled below the standing deposit facility rate of 5.25% Wednesday despite the liquidity decifit in the banking system. There was not much demand from banks for funds as most of the payments for goods and services tax have already been made and no major outflows are lined up for this week, dealers said.

The call money rate ended at 5.00% Wednesday, up from Tuesday's close of 4.95%. The weighted average rate ended at 5.52%, down from 5.59% Tuesday. The call rate had opened higher on firm demand for funds from primary dealerships, dealers said. However, after the variable rate repo auction, it remained below the RBI's SDF rate for the rest of the session. On the day, the rate moved in a range of 4.75-5.60%. The central bank held an overnight variable rate repo auction of INR 1.50 trillion Wednesday and took all bids worth INR 489.80 billion. The total volume traded in the call money market was INR 167.05 billion Wednesday.

The triparty repo market ended at 5.35%, slightly up from 5.30% Tuesday. The weighted average rate in the triparty repo market settled at 5.45%, up slightly from its previous close of 5.41%. Wednesday, the volume of trades in the triparty repo market was INR 4.41 trillion, up from INR 4.36 trillion Tuesday.

"Banks are expecting the month-end inflows from the government's payouts of salary and pension to begin later this week," a dealer at a state-owned bank said. Traders said the expectations of month-end inflows kept banks from borrowing aggressively.

Mutual funds, which are major lenders in the triparty repo market, were said to be facing a shortage of deployable funds Wednesday and hence were less active on the lending front, dealers said. The variable rate repo auction conducted on Wednesday was widely expected by banks and hence there was no panic borrowing in the market. This sentiment kept the rates in the triparty repo market below the repo rate, dealers said.

As per latest data from the RBI, the liquidity deficit rose to INR 871.83 billion Tuesday--the highest level since Mar. 25--from INR 319.87 billion Monday. Systemic liquidity is expected to improve later this week once the GST outflow concludes, dealers said.

After market hours, the central bank announced an overnight variable rate repo auction for INR 1.25 trillion to be held Thursday, between 0930 IST and 1000 IST. This was in line with traders' expectations. Two variable rate repo auctions of different tenures are due for reversal Thursday, for a cumulative INR 1.09 trillion.

OUTLOOK

* On Thursday, 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 variable rate repo auction. 

* Later in the day, rates may cool as the RBI will conduct an overnight variable rate repo auction for INR 1.25 trillion at 0930-1000 IST.

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

CALL RATE

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

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

4.95%--Tuesday'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 as liquidity deficit rises further

MUMBAI – The one-day interbank call money rate opened at 5.60% Wednesday on firm demand from banks due to the reversal of two variable rate repo auctions held Tuesday. The call money rates were also on the higher side due to loan disbursement requirements as the end of the Jul-Sept quarter approaches, dealers said. The rise in liquidity deficit to INR 871.83 billion Tuesday--the highest since Mar. 25--from INR 319.87 billion Monday, could also have a bearing on demand, they said. The higher-than-expected outflow for the goods and services tax likely led to the big liquidity crunch, they said.

At 0943 IST, the one-day interbank call money market rate was 5.60% and the weighted average was the same. The rate in the tri-party repo market was 5.39% and the weighted average was 5.46%. Trade volume in the call market was around INR 54.19 billion at 0930 IST, compared with INR 62.52 billion at the same time Tuesday.

The call money rates could stay in the range of 5.50-5.60% even if Wednesday's VRR auction is fully subscribed due to pressure on liquidity, a dealer at a private sector bank said. 

"We expect the call money rates to stay above the RBI's repo rate of 5.50% because the INR-1-trillion auction won't offset the loan disbursement requirements for quarter end and the reversal amount of nearly INR 600 billion as part of six-day VRR (variable rate repo)," the dealer said. Friday, the central bank conducted a six-day VRR auction, wherein it took all bids worth INR 599.67 billion. 

In the TREPs market, rates are expected to rise above 5.50% on firm demand from banks amid the liquidity deficit and lack of any major inflows for the day, dealers said.

On Wednesday, the Reserve Bank of India held an overnight variable rate repo auction of INR 1.50 trillion from 0930 IST to 1000 IST. The subscription amount at the auction is seen at INR 1.31 trillion and the cut-off rate at 5.51%, according to the average estimate of eight market participants polled by Informist.

Meanwhile, banks maintained INR 9.59 trillion cash balances with the RBI on Tuesday, higher than INR 8.80 trillion Monday. The daily average cash reserve requirement for the fortnight ending Oct. 3 is INR 9.13 trillion.  (Muskan Lodhi)

End

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

Edited by Rajeev Pai

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