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Informist, Thursday, Oct. 9, 2025

By Aaryan Khanna

MUMBAI – The one-day interbank call money rate ended at the Reserve Bank of India's marginal standing facility rate of 5.75%, its highest closing level since Jun. 3. Demand in the final hour of trade from banks to meet their liquidity needs pushed up both rates and volumes.

Thursday, the one-day call rate ended at 5.75% against Wednesday's close of 4.95%. The weighted average call rate for the day was 5.51%, up sharply from 5.34% the previous day. The total volume in the call money market rose 35% from the previous day to a higher-than-usual INR 208.23 billion, with over INR 18 billion of trade in the last hour.

Conditions in the larger and more active triparty repo market, which is collateralised and includes mutual funds, similarly showed signs of liquidity strain. Mutual funds turned borrowers after cash was locked into a bevy of open initial public offerings this week, headlined by Tata Capital and LG Electronics. The triparty repo rate ended at 5.74% at 1600 IST, and the weighted average triparty repo rate was 5.55% Thursday against 5.27% Tuesday.

"The stress has been building up and the market knew that IPOs would be a problem," a dealer at a state-owned bank said. "Until yesterday (Wednesday), we were able to manage, but after the VRRR (variable rate reverse repo) auction today (Thursday), people were really left with no option but to tap the market."

The RBI accepted all bids worth INR 468.60 billion at its overnight INR 500-billion VRRR auction. Traders had expected the RBI to drain liquidity earlier this week when the banking system liquidity surplus was higher, but since the central bank did not conduct such an operation, they had expected overnight rates to remain below the repo rate. Some traders were caught off guard by the announcement after market hours Wednesday, dealers said. 

The systemic liquidity surplus, as measured by the RBI's net liquidity absorbed from the banking system, fell to INR 1.29 trillion Wednesday from INR 1.75 trillion Sunday. The RBI's aggressive dollar sales to support the exchange rate over the past two weeks were also draining rupee liquidity, even as some of the pressure was offset by the the central bank's activity in the dollar/rupee forwards market, dealers said. The net impact remained of a liquidity drain, which was likely weighing on liquidity conditions at a time when tax deducted at source and excise duty payments also pulled out between INR 600 billion and INR 700 billion from the banking system.

OUTLOOK

* The three-day call rate may open at the RBI's repo rate Friday owing to demand for funds from banks amid demand for cash at initial public offerings.

* During the day, the three-day call money rate is seen in the range of 4.90-5.75%, dealers said.

CALL RATE

5.75%--Thursday's close for one-day loans

5.50%--Thursday's open for one-day loans

4.95%--Wednesday's close for one-day loans

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Near repo rate on early demand as RBI conducts VRRR auction

MUMBAI – The one-day interbank call money rate was around the Reserve Bank of India's repo rate of 5.50% Thursday on early rush for funds as banks look to park at the overnight variable rate reverse repo auction conducted by the central bank, dealers said. Rates may fall later in the day as liquidity surplus in the banking system is seen comfortable, they said.

On Thursday, the one-day call rate was at 5.40% at 1006 IST, with the weighted average rate at the repo rate. The call rate moved in a range of 5.35-5.55% during the first hour of the session. Total volumes in the call market was INR 58.68 billion at 0930 IST, against INR 55.01 billion on Wednesday.

Meanwhile, the triparty repo rate was at 5.41% while its weighted average rate was at 5.38%. Total volumes traded in the TREPs market was INR 1.53 trillion at 1013 IST.

The RBI absorbed INR 1.29 trillion worth of liquidity from the banking system Wednesday--which is a proxy for systemic liquidity surplus--lower than INR 1.48 trillion on Tuesday. The fall in system liquidity was due to outflows owing to payment for excise and tax deducted at source, dealers said. 

With the payment for excise duty seen over, liquidity was seen comfortable, dealers said. However, rates hovered around the RBI's repo rate in early trade as banks chose to park at the RBI's VRRR auction, where the RBI set a cut-off at 5.49%. The RBI took bids worth INR 468.60 billion at the overnight VRRR auction, against INR 500 billion notitfied. 

"If you discount the rates right now, people will be getting a better rate at the VRRR than in the market. So there we saw good subscription," a dealer at a private sector bank said. "There should be some demand because there is the LG (Electronics) IPO (initial public offer) but for that also people have already set some funds aside, so rate should come down from here."

Traders expect rates to fall below the RBI's repo rate as there are no major scheduled outflows during the week, dealers said.  (Srijita Bose)  End

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

Edited by Rajeev Pai

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