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Informist, Monday, Sept. 29, 2025

By Shravani Chandiwade

MUMBAI – The one-day interbank call money rate ended below the standing deposit facility rate of 5.25% Monday. The triparty repo market rate ended at the standing deposit facility rate. Banks' need for funds eased with the commencement of month-end inflows from the government's salary and pension payouts, dealers said. As of Sunday, the surplus liquidity in the banking system also improved, keeping banks away from borrowing actively in the market, they said.

As per the latest data, the RBI Sunday net absorbed INR 469.41 billion from the banking system against INR 464.22 billion Saturday. The RBI's net absorption is a proxy for the systemic liquidity surplus. The month-end inflows from the government's payouts of salaries and pensions are expected to add liquidity of around INR 1.00 trillion to INR 1.50 trillion into the banking system, dealers said.

Monday, the call money rate settled at 5.00%, sharply lower than 5.57% on the three-day call Friday. The call money market opened Monday at a higher rate of 5.60% on firm demand for funds from primary dealerships. However, after the early trade rush had subsided, the rate remained below the standing deposit facility rate. On the day, the call rate moved in a range of 4.75-5.60%.

The weighted average call money rate ended at 5.53% Monday, down from 5.58% Friday. The total volume traded in the call money market was INR 182.04 billion, up from INR 178.99 billion Friday. 

"People are opening new accounts and due to the festive season, their loan book is also likely to improve," a dealer at a private-sector bank said. Banks do not have any significant outflows scheduled for this week. This also kept their participation on the borrowing front low Monday, dealers said.

The rate in the triparty repo market ended at 5.25%, down from its previous close of 5.49%. The weighted average triparty repo rate settled at 5.40% Monday, down from 5.44% Friday. Mutual funds, which are large investors in the triparty repo market, have been under redemption pressure, usual near the end of the month, dealers said.

The total volume traded in the triparty repo market Monday was INR 4.31 trillion, down from INR 4.37 trillion Friday. "Mutual funds were seen lending but the borrowing from banks has reduced, hence the borrowing cost mostly hovered around 5.40%," a dealer at a state-owned bank said. The triparty repo rate moved in a band of 5.25-5.51%.

After market hours, the central bank announced an overnight variable rate repo auction of INR 2.00 trillion to be held Tuesday between 0930 IST and 1000 IST, something most traders were not expecting. The RBI had conducted a four-day variable rate repo auction Friday where it took all bids worth INR 909.31 billion. This is due for reversal Tuesday.

OUTLOOK

* Tuesday, the one-day call money rate is likely to be below the RBI's repo rate owing to ample liquidity surplus and the variable rate repo auction.

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

CALL RATE

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

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

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

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Above RBI's repo rate on quarter-end funding needs of banks

MUMBAI – The one-day interbank call money rate opened above the Reserve Bank of India's repo rate Monday on quarter-end requirements of banks, dealers said. The government's month-end expenditure for salary and pension payments were yet to start, which put pressure on systemic liquidity. Some dealers expect the RBI to announce an overnight variable rate repo auction of INR 500 billion to INR 1.00 trillion later in the day, but most do not expect any such auction as the government's payouts are likely to begin Monday and rates could cool off later in the day, they said.

At 0917 IST, the one-day interbank call money rate was 5.60%. The weighted average rate was also the same. The rate in the tri-party repo market was 5.41% and the weighted average rate was 5.42%. Trade volume in the call market was around INR 37.20 billion at 0930 IST, lower than INR 43.65 billion at the same time Friday.

"We're almost at the end of the quarter and government spending hasn't come in yet," a dealer at a private sector bank said. "But let's see what Saturday and Sunday's money market operations shows."

As per latest data, the RBI Friday net absorbed INR 457.90 billion from the banking system – a proxy for systemic liquidity surplus, against INR 129.82 billion Thursday. Traders expect the government's salary and pension payouts to improve the liquidity surplus by INR 1.00 trillion to INR 1.50 trillion. On Tuesday, the RBI's four-day variable rate repo auction of INR 909.31 billion is due for reversal but by then inflows from the payouts would have begun, dealers said.

"At the first trade, someone borrowed at 5.60% because of pressure on liquidity and PDs (primary dealerships) are borrowing heavily, everyone is following that rate only," a money market dealer at a primary dealership said. "But later on, rates will start cooling off." Primary dealerships borrowed funds for settlement of Friday's weekly gilt auction of INR 320 billion, dealers said.

Traders now await the RBI's Monetary Policy Committee meeting outcome Wednesday. The three-day meeting kicks off Monday. Most traders do not expect a rate cut at the outcome, but soft commentary indicating scope for a rate cut at the panel's meeting in December. Later in the week, the second tranche of inflows from the RBI's four-stage cut in the cash reserve ratio will boost systemic liquidity, dealers said. The CRR will be lowered to 3.50% of banks' net demand and time liabilities Saturday. 

Banks maintained INR 9.04 trillion of cash balance with the RBI Friday, down from INR 9.16 trillion on Thursday. The daily average cash reserve requirement for the fortnight ending Oct. 3 is INR 9.13 trillion.  (Cassandra Carvalho)

End

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

Edited by Rajeev Pai

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