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Informist, Friday, Oct. 3, 2025

By Srijita Bose

MUMBAI – The three-day interbank call money rate ended below the Reserve Bank of India's repo rate of 5.50% on Friday as the liquidity surplus in the banking system improved, dealers said. Expectations of the durable liquidity improving further due to the 25 basis-point cut in the cash reserve ratio on Saturday kept the call rate below the repo rate throughout the day. 

On Friday, the three-day call rate ended at 5.45%, higher than 5.00% at close for two-day loans Wednesday. Money markets were shut Thursday for Gandhi Jayanti. On Friday, the three-day call rate moved in a range of 4.85-5.45%. Total volumes in the call money market were at INR 205.39 billion, up from INR 166.27 billion Wednesday. 

The RBI Thursday net absorbed INR 1.77 trillion from the banking system, a proxy for systemic liquidity surplus, higher than INR 1.66 trillion on Wednesday. The government's salary and pension payments are expected to infuse nearly INR 1 trillion worth of liquidity into the system, market participants said. A 25-bps cut in the cash reserve ratio will come into effect Saturday, which is expected to infuse INR 600 billion to INR 700 billion of durable liquidity into the system. This will be second 25-bps cut in the CRR, of the 100 bps of cut announced in August, and will bring down the CRR to 3.50%.

Demand from primary dealers limited the fall in call rates Friday, dealers said. "PDs (primary dealers) were borrowing today, some was because of gilts auction also, so the rates did not fall much," a dealer at a primary dealership said. "Some small co-operative banks were also there on the borrowing side." This was also likely due to demand from banks for the reporting Friday, dealers said. 

The triparty repo rate ended at 5.30% Friday, against 5.23% Wednesday. The weighted average triparty repo rate was at 5.29%, the same as Wednesday. Total volumes in the triparty repo segment were at INR 4.19 trillion, slighly lower than INR 4.20 trillion Wednesday. 

OUTLOOK

* The two-day call rate may open below the RBI's repo rate on low demand for funds. As is usual for a Saturday, trade volumes may remain low.

* During the day, the two-day call money rate is seen in a range of 4.75-5.50%, dealers said.

CALL RATE

5.45%--Friday's close for three-day loans

5.40%--Friday's open for three-day loans

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

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Below RBI's repo rate on low demand, improved liquidity surplus

MUMBAI – The interbank call money rate opened below the Reserve Bank of India's repo rate Friday as liquidity surplus in the banking system improved further, dealers said. The call rates were also on the lower side because inflows owing to the government's salary and pension payments likely reduced the borrowing demand and as there are no major outflows scheduled for the day, they said.

At 1010 IST, the three-day call money rate was 5.35% and the weighted average was 5.41%. The rate in the tri-party repo market was 5.30% and the weighted average rate was 5.29%. Trade volume in the call market was around INR 76.11 billion at 1023 IST, lower than INR 95.96 billion at 1100 IST Wednesday. India's financial markets were shut Thursday for Gandhi Jayanti and Dussehra.

The RBI Wednesday net absorbed INR 1.66 trillion from the banking system, which is a proxy for systemic liquidity surplus, higher than INR 780.21 billion on Tuesday. Dealers said the bulk of the government's salary and pension payouts had already come, and would add around INR 1.50 trillion to the systemic liquidity this week. "Government's month-end inflows are usually in correspondence with GST outflows which was around INR 1.89 trillion, hence we're expecting these inflows to be more than INR 1 trillion," a dealer at a state-owned bank said.

Call money and TREPS rates may cool off during the day as banks will meet their funding needs for reporting Friday in the early part of the session, dealers said. The systemic liquidity surplus is likely to rise further Saturday as a 25-basis-point cut in the cash reserve ratio will come into effect. This will be the second 25-bps cut in the CRR, of the 100-bps of cut announced in June, and will bring down the CRR to 3.50% of banks' net demand and time liabilities.

On account of improved liquidity surplus, some traders expect the central bank to conduct variable reverse repo rate auction on Monday. "The RBI usually comes up with VRRR when the liquidity surplus nears INR 2 trillion," a dealer at a private-sector bank said. "So, the infusion of funds from CRR (cash reserve ratio) cut on Saturday will prompt the central bank to conduct VRRR Monday," the dealer said.

Meanwhile, banks maintained INR 9.22 trillion of cash balance with the RBI Wednesday, lower than INR 9.90 trillion on Tuesday. The daily average cash reserve requirement for the fortnight ending Oct. 3 was INR 9.13 trillion. This requirement will go down by around INR 600 billion after the CRR cut. Rates were little changed after the RBI's Monetary Policy Committee decision on Wednesday, where the panel held the repo rate at 5.50% and kept its policy stance at 'neutral'.  (Muskan Lodhi)

End

Edited by Avishek Dutta

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