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Informist, Thursday, Sept. 25, 2025

By Shravani Chandiwade

MUMBAI – The interbank call money rate ended below the Standing Deposit Facility rate of 5.25% Thursday. It opened at elevated levels. However, after the early trade rush subsided, it stayed below the SDF level for most part of the day. The triparty repo rate also ended below the SDF level, however, it was above the Reserve Bank of India's repo rate of 5.50% as mutual funds were charging high rates due to month-end redemption pressure, dealers said.

Thursday, the interbank call money rate ended flat at 5.00%. Only a few banks were active on the lending and the borrowing front in the call money market, dealers said. The weighted average call money rate ended at 5.58%, up from 5.52% Wednesday. The call rate moved in a range of 4.75-5.75%.

The volume in the call money market Thursday was INR 209.25 billion, up from INR 167.05 billion. Later in the day, a few banks borrowed large funds as rates were low in the call money market, dealers said. Month-end inflows from the government's payout of salary and pension will likely start later this week which will improve systemic liquidity, dealers said.

As per the Reserve Bank of India's latest data, the central bank's net infusion into the banking system--a proxy for systemic liquidity deficit--stood at INR 263.19 billion on Wednesday, sharply lower than INR 871.83 billion on Tuesday.

The central bank held an overnight variable rate repo auction of INR 1.25 trillion and took all bids worth INR 690.60 billion. Banks were borrowing actively in the triparty repo market for arbitrage benefits during the auction window, dealers said.

The triparty repo rate settled at 5.15% Thursday, down from 5.35% Wednesday. During the session, rates touched a high of 5.74% as banks borrowed aggressively in this market. Month-end redemption pressure on mutual funds also kept rates elevated for most of the day, dealers said. However, after 1500 IST, borrowing from banks reduced, which brought the rates below the SDF level.

The weighted average rate in the triparty repo market ended at 5.52%, up from its previous close of 5.45%. Thursday, the total volume traded in the triparty repo market was INR 4.26 trillion, down from INR 4.41 trillion. The rate moved in a band of 5.15-5.74%.

Thursday, after the market hours, the RBI announced a four-day variable rate repo auction of INR 1 trillion to be held on Friday between 0930 IST and 1000 IST. Traders had not expected the central bank to conduct an variable-rate repo auction. 

OUTLOOK

* On Friday, the three-day call money rate is likely to open below the RBI's repo rate due to low funding needs ahead of month-end   inflows

* Later in the day, rates may cool as the RBI will conduct a four-day 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 4.75-5.60%, dealers said.

CALL RATE

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

5.65%--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 repo rate due to reversal of 2 VRRs totalling INR 1.09 tln

MUMBAI – The one-day interbank call money rate opened at 5.65% Thursday on firm demand from banks due to the reversal of two variable rate repo auctions of different tenures, draining a total of INR 1.09 trillion from the banking system, dealers said. Rates in the call money market were also on the higher side as banks required funds for loan disbursements as the end of the Jul-Sept quarter approaches, they said.  

As per latest data from the RBI, net infusion by the central bank into the banking system – a proxy for systemic liquidity deficit – was INR 263.19 billion on Wednesday, down from INR 871.83 billion Tuesday. Systemic liquidity is expected to improve later this month due to inflows from the government's payouts of salary and pension, dealers said.

At 0940 IST, the one-day interbank call money market rate was 5.65% and the weighted average was 5.64%. The rate in the tri-party repo market was 5.50% and the weighted average was 5.49%. Trade volume in the call market was around INR 72.02 billion at 0930 IST, higher than INR 54.19 billion at the same time Wednesday.

Call money rates may cool later in the day as traders expect to meet their demand for funds at the VRR auction Thursday, dealers said. "Though there is a reversal of two VRRs, today's (Thursday) auction amount is enough to offset the outflow," a dealer at a state-owned bank said. Thursday, the Reserve Bank of India held an overnight variable rate repo auction for INR 1.25 trillion. The subscription amount at the auction is seen at around INR 645 billion and the cut-off rate at 5.51%, according to the average of the estimates of 10 market participants polled by Informist.

In the TREPs market, some traders expect rates to stay near the RBI's repo rate of 5.50% since mutual funds are not expected to lend actively in the market due to shortage of deployable funds. Others see rates cooling below the repo rate due to lack of any major outflows. "All the major outflows have concluded by Sept. 20-21 and requirement for funds has reduced," a dealer at a private-sector bank said. 

Meanwhile, banks maintained INR 9.18 trillion of cash balance with the RBI Wednesday, slightly lower than INR 9.59 trillion Tuesday. 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 Akul Nishant Akhoury

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