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Informist, Monday, Oct. 6, 2025

 

By Aaryan Khanna

 

MUMBAI – The interbank call money rate ended below the standing deposit facility rate of 5.25?cause of the liquidity surplus in the banking system and a lack of scheduled outflows. The weighted average triparty repo rate also fell to the lower bound of the Liquidity Adjustment Facility corridor as the Reserve Bank of India did not conduct a variable rate reverse repo operation, dealers said.

 

On Monday, the one-day call rate ended at 5.00%, the same level as the two-day call rate Saturday. The weighted average call rate was at 5.35%, compared with 5.02% Saturday. The total volume in the call money market was lower than usual, at INR 137.58 billion.

 

Primary dealerships demanded funds early in the day for the settlement of Friday's INR 320-billion gilt auction but banks' borrowing needs were stagnant. The RBI net absorbed INR 1.75 trillion Sunday, against INR 1.70 trillion Saturday and INR 1.90 trillion Friday. Dealers said a bulk of the government's salary and pension payouts had already come in and likely added around INR 1.50 trillion to the systemic liquidity.

 

Banks were holding more cash than required with the central bank after the cash reserve ratio cut came into effect Saturday, which freed up INR 669 billion of durable liquidity. This will be reflected in the liquidity surplus over the week as banks begin to bring down the reserves that provide no yield, dealers said. Banks are unlikely to tap overnight money markets except in a crunch as tax outflows for excise and tax deducted from source take place beginning Tuesday. Some traders also expect the RBI to pull overnight money market rates closer to the repo rate by announcing a VRRR auction.

 

"(There is) easy liquidity, why to borrow higher," a dealer at a private-sector bank said. "(VRRR) will surely come." The weighted average triparty rates has been below 5.30% over the last few days, and the rate ended at 5.25% Monday.

 

OUTLOOK

* The one-day call rate may open below the RBI's repo rate due to a significant liquidity surplus, especially with the central bank avoiding the announcement of any VRRR operations to drain short-term liquidity.

 

* During the day, the one-day call money rate is seen in the range of 4.75-5.45%, dealers said.

 

CALL RATE

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

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

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

 

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	Monday	Friday
Overnight	5.39	5.40
3-day	--	--
14-day	5.79	5.79
1-month	5.94	5.96
3-month	6.10	6.10

 

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India Call: Below RBI's repo rate as liquidity surplus rises further

 

MUMBAI – The interbank call money rate on Monday was below the Reserve Bank of India's repo rate because of higher liquidity surplus in the banking system, dealers said. Rates are likely to ease further during the day as the liquidity surplus rises further, they said. 

 

Monday, the one-day call rate opened at 5.40% and was at 5.30% at 1005 IST. The weighted average call rate was at 5.40%, compared with 5.02% Saturday. The total volume in the call money market was INR 59.90 billion at 0930 IST.  

 

In early trade, there was some demand from primary dealers and banks ahead of the settlement of gilt auction of Friday, dealers said. The government sold a bond worth INR 320 billion on Friday. 

 

"There was some early demand from primay dealers for gilt settlement but rates should come down in the second half," a dealer at a private sector bank said. "On the equity side there are some IPOs (innitial public offers) lined up so some demand could be there from mutual funds but the liquidity has improved so rates should stay supported."

 

The RBI Friday net absorbed INR 1.90 trillion from the banking system, which is a proxy for systemic liquidity surplus, higher than INR 1.77 trillion on Thursday. Dealers said a bulk of the government's salary and pension payouts had already come and likely added around INR 1.50 trillion to the systemic liquidity.

 

A  cut in the cash reserve ratio of 25 basis points which came into effect Sarturday is expected to further improve the system liquidity, dealers said. This was the second 25-bps cut in the CRR in the ongoing cycle of the 100 bps of cut announced in August, and brought down the CRR to 3.50%. The CRR cut on Saturday is expected to infuse INR 600 billion to INR 700 billion of durable liquidity into the system.  (Srijita Bose)  End

 

Edited by Rajeev Pai

 

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