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Informist, Tuesday, Sept. 30, 2025

By Shravani Chandiwade

MUMBAI – The weighted average interbank call money rate ended near the Reserve Bank of India's Marginal Standing Facility rate of 5.75% as public sector banks, the major lenders in the call money market, refrained from lending actively, dealers said. These banks were seen holding onto their position cautiously as it is the quarter-end and banks need to maintain their balance sheets, they said. However, the one-day call rate ended lower than the RBI's Standing Deposit Facility of 5.25% Tuesday, as demand from banks eased towards the end of the day. 

The one-day interbank call money rate settled flat at its previous close of 5.00%. The weighted average rate ended at 5.69%, sharply higher than 5.53% Monday. The total volume traded in the call money market Tuesday was INR 119.24 billion, sharply lower than INR 182.04 billion Monday. "Banks active on the lending front were charging high rates due to the quarter-end period but borrowing was also not that aggressive," a dealer at a state-owned bank said. The call money rate moved in a range of 4.75-5.85%.

Loan disbursements typically rise during the month-end period, and the increase is more pronounced this time with the festival season approaching. Banks were borrowing primarily to meet these requirements Tuesday, dealers said. Banks also likely borrowed funds to manage their books near the end of the quarter, with no other significant outflows lined up for the week, dealers said.

The liquidity surplus in the banking system also improved due to month-end inflows from the government's payouts of salary and pensions, which began Monday. As per latest data from the RBI, the central bank net absorbed INR 550.06 billion from the banking system, which is a proxy for systemic liquidity surplus, higher than INR 469.41 billion on Sunday.

The rate in the triparty repo market ended at the RBI's repo rate of 5.50% Tuesday, sharply higher than 5.25% Monday. The weighted average triparty repo rate was also up at 5.47% compared to its previous close of 5.40%. The rates remained elevated throughout the session despite the reduction in volumes traded. 

"Mutual funds are charging high rates as they are under redemption pressure. Hence, banks were seen moving to the call money market for funds," a dealer at a private sector bank said.

Mutual funds, which are major lenders in the triparty repo market, were charging rates more than usual due to month-end redemption pressure, dealers said. The total volume traded in the triparty repo market on Tuesday was INR 4.00 trillion, slightly lower than INR 4.31 trillion Monday. 

On Tuesday, the RBI held an overnight variable rate repo auction for INR 2.00 trillion and took all bids worth INR 851.97 billion. Traders viewed this auction as an attempt by the central bank to ensure banks do not face shortage of funds ahead of the festive season.

After market hours, the RBI announced a two-day varibale rate repo auction for INR 1.00 trillion to be held on Wednesday between 1200 IST and 1230 IST. This auction came as a surprise as traders were not expecting any other variable rate repo auction this week.

OUTLOOK

* Wednesday, the two-day call money rate is likely to be near the RBI's repo rate due to reversal of the variable rate repo auction. 

* Volumes in the first hour of trading may be thin before the RBI's Monetary Policy Committee decision at 1000 IST. 

* During the day, the two-day call money rate is seen in a range of 4.75-5.65%, dealers said.

CALL RATE

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

5.75%--Tuesday's open for one-day loans

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

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: At RBI's MSF rate as banks shy from lending for qtr-end advances

MUMBAI – The one-day interbank call money rate opened at the Reserve Bank of India's Marginal Standing Facility as banks likely refrained from lending actively due to loan disbursements at the end of the Jul-Sept quarter, dealers said. Trade volume in the call market was around INR 12.20 billion at 0930 IST, sharply lower than INR 37.20 billion same time Monday.

The call rates were on the higher side also due to the outflow of INR 909.31 billion as reversal of the central bank's four-day variable rate repo auction held Friday, dealers said. At 0935 IST, the one-day call money rate was 5.75%. The weighted average was also the same. The rate in the tri-party repo market was 5.49% and the weighted average rate was 5.50%.

The RBI Monday net absorbed INR 550.06 billion from the banking system, which is a proxy for systemic liquidity surplus, higher than INR 469.41 billion on Sunday. Traders expect the government's salary and pension payouts to add INR 1.00 trillion to INR 1.50 trillion to the systemic liquidity, but the bulk of the inflow is expected only later in the day or Wednesday, dealers said.

Call money rates may not cool off significantly as banks require funds for loan disbursements, but large banks may be reluctant to lend at the end of the Jul-Sept quarter, dealers said. The TREPS rates are also seen near the repo rate as banks will be borrowing actively in this market--wherein mutual funds are the usual lenders--during the day.

On Tuesday, the RBI conducted an overnight VRR auction for INR 2.00 trillion. The subscription amount at the auction is seen at INR 1.00 trillion and the cut-off rate at 5.51%, according to the median of estimates given by 10 market participants polled by Informist.

"The auction will be highly under-subscribed because the TREPS rates are conducive at 5.49-5.50%," a dealer at a private-sector bank said. "However, the subscription amount can go up to INR 1 trillion if the TREPS rates rise above RBI's repo rate of 5.50% during the auction window," the dealer said. Traders also expect the VRR auction to cushion the outflow of INR 909.31 billion from the VRR auction held Friday, dealers said.

Meanwhile, banks maintained INR 9.25 trillion of cash balance with the RBI Monday, slightly higher than INR 9.03 trillion on Sunday. The daily average cash reserve requirement for the fortnight ending Oct. 3 is INR 9.13 trillion.  End

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

Edited by Avishek Dutta

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