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Informist, Friday, Sept. 26, 2025

By Shravani Chandiwade

MUMBAI – The three-day interbank call money rate ended above the Reserve Bank of India's repo rate of 5.50%, likely due to firm borrowing demand towards the close of the session. However, during most of the session, the call rate was below the RBI's Standing Deposit Level of 5.25%. 

Friday, three-day call money rate settled at 5.57%, up from 5.00% Thursday. The weighted average rate in the call money market closed at 5.58% similar to its previous close, despite the reduction in the volumes traded. 

Public-sector banks, which are usual lenders in the call money market, did not lend aggressively ahead of the Jul-Sept quarter-end which resulted in lower trade volumes in the call market, dealers said. Friday, the total volume traded in the call money market was INR 178.98 billion, down from INR 209.25 billion Thursday.  

"Few banks which were lending in the call market charged high rates to the borrowers. Therefore, the weighted average rate was up the whole day," a dealer at a state-owned bank said. The majority of borrowing was done in the early trade hours by the primary dealerships due to the weekly gilt auction of INR 320 billion, which also took the weighted average up, they said.

The rate in the triparty repo market ended at 5.49%, sharply up from its previous close of 5.15%. The weighted average rate in the triparty repo market settled at 5.44% Friday, down from 5.52% Thursday. The rate in the triparty repo market remained elevated throughout the session due to month-end redemption pressures of mutual funds, the major lenders in the market. 

The total volume traded in the triparty repo market Friday was INR 4.37 trillion, up from INR 4.25 trillion Thursday. Dealers expect the rates in the triparty repo market to anchor around the repo rate of 5.50% next week until the month-end redemption pressure on mutual funds subsides.

"Banks majorly borrowed on the basis of their requirements as there are no other substantial outflows for the upcoming week," a dealer at another state-owned bank said.

The systemic liquidity improved as of Thursday and returned to a surplus from a deficit in the previous three sessions. As per the latest data from the RBI, net absorption by the central bank from the banking system – a proxy for systemic liquidity surplus – was INR 129.82 billion Thursday, against the net injection of INR 263.19 billion Wednesday.  

The central bank held a four-day variable-rate repo auction for INR 1 trillion. It took all bids worth INR 909.31 billion. "Banks borrowed from the central bank as the reversal of the tender is on Tuesday and the liquidity will likely improve further by then due to the month-end inflows from the government's payments (of salary and pensions)," a dealer at another state-owned bank said. 

OUTLOOK

* Call market is shut Saturday. On Monday, the one-day call money rate is likely to open near the RBI's repo rate due to demand for funds by primary dealerships.  

* Later in the day, rates may cool as the as month-end inflows are likely to commence from Monday

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

CALL RATE

5.57%--Friday's close for three-day loans

5.65%--Friday's open for three-day loans

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

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 India Call: Above repo as PDs, banks borrow for gilt auction, qtr-end needs

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 from primary dealerships ahead of the INR-320-billion weekly gilt auction and demand from banks due to loan disbursement requirements as the end of the Jul-Sept quarter approaches, they said.    

At 0957 IST, the three-day interbank call money market rate was 5.65%, with the same weighted average. The rate in the tri-party repo market was 5.51% with the same weighted average rate. Trade volume in the call market was around INR 43.65 billion at 0930 IST, lower than INR 72.02 billion at the same time Thursday.

As per latest data from the RBI, net absorption by the central bank from the banking system – a proxy for systemic liquidity surplus – was INR 129.82 billion Thursday, against the net injection of INR 263.19 billion Wednesday. Traders expect the government's payouts of salary and pension, starting by the end of this month, to improve systemic liquidity. 

"There's very little surplus liquidity but the government spending will come in, so RBI is just trying to smoothen the rates for the weekend because TREPs also at 5.51% and banks are borrowing at the last hour from the market, that's why the tenure is four days," a trader at a primary dealership said. "But because its four days, people will borrow 50-60%, not more than that."  

The RBI held a four-day variable rate repo auction for INR 1.00 trillion at 0930-1000 IST. The subscription amount at the auction is seen at around INR 750 billion and the cut-off rate at 5.51%, according to the average of the estimates of 11 market participants polled by Informist. Traders also speculated that the central bank chose a four-day tenure since it wouldn't want a reversal of the auction on or after the outcome of the RBI's Monetary Policy Committee meeting on Wednesday, especially if the MPC cuts rates by 25 basis points. 

Traders avoided the triparty repo market and preferred borrowing through the call market or through the RBI's variable rate repo auction. Rates in the triparty repo market are seen elevated during the day since mutual funds are facing month-end redemption pressures and hence may not be as active in lending. Nearing the end of the Jul-Sept quarter, banks may also be reluctant to lend, dealers said. 

Meanwhile, banks maintained INR 9.16 trillion of cash balance with the RBI Thursday, similar to INR 9.18 trillion on Wednesday. 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 Deepshikha Bhardwaj

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