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Informist, Monday, Oct. 13, 2025

By Cassandra Carvalho

MUMBAI – The one-day interbank call money rate Monday ended at the Reserve Bank of India's repo rate of 5.50%. Demand in the final hour of trade from banks to meet their liquidity needs pushed the call rate up, dealers said. The last trade in the call money market was at 1856 IST for INR 830 million.

The one-day call rate ended at 5.50% against Friday's three-day call rate of 5.00%. The weighted average call rate for the day was 5.47%, down sharply from 5.58% the previous day. The total volume in the call money market was INR 195.50 billion, up from INR 181.69 billion the previous day. The triparty repo rate closed at 5.28%, with its weighted average rate at 5.32%.

Some banks and mutual funds were lending at lower rates in the money market as some funds tied up for subscription to initial public offerings last week were released during the day, dealers said. However, fresh IPOs this week and requirements ahead of Diwali kept demand for funds up, dealers said. Canara HSBC Life Insurance Co. Ltd.'s initial public offering was subscribed 27% as of second day on Monday.

"Reversal of LG Electronics (IPO) was today (Monday), some banks' liquidity was released majorly because of the exchange of IPO funds," a dealer at a private sector bank said. "Canara Robeco and Rubicon (reversal) are also there." After allotment of shares is done, the exchange of funds gives some comfort, the dealer said.

Some traders expect major cash withdrawals during Diwali from banks and some of them have already kept aside funds for the same, while others may reduce their funds parked with the RBI under the Standing Deposit Facility, they said.

Traders do not expect any variable rate repo or variable rate reverse repo auction to be announced this week due to lack of any system-wide liquidity outflows or inflows. As money markets are shut for two days next week, traders expect goods and services tax outflows to only begin later next week instead of the usual 21st of the month. After the surprise VRRR auction held last week, some traders were expecting another such auction Friday.

"Last week there was some miscalculation because of these IPOs so there was a VRRR," a dealer at a state-owned bank said. "These numbers were known and you know what is the total overall IPO number and obviously if people apply 40 times then banks know that 39 times worth of money will come back. There is nothing unexpected."

The systemic liquidity surplus, as measured by the RBI's net liquidity absorbed from the banking system, was INR 1.55 trillion on Sunday, up from INR 1.49 trillion Saturday.

OUTLOOK

* On Tuesday, the one-day call rate may open at the RBI's repo rate owing to demand for funds from banks amid demand for cash for subscribing to initial public offerings of companies.

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

CALL RATE

5.50%--Monday's close for one-day loans

5.55%--Monday's open for one-day loans

5.00%--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 early demand for funds

MUMBAI - The interbank call money rate was above the Reserve Bank of India's repo rate Monday on early demand for funds, dealers said. However, rates are expected to fall below the repo rate during the day as demand is likely to fade and as liquidity in the banking system is seen comfortable, they said.

At 0939 IST, the one-day call rate was at 5.55%, against three-day close of 5.00% Friday. The weighted average call rate was 5.55%. Total volumes in the call money market were INR 68.13 billion at 0930 IST, up from INR 58.68 billion Friday. 

The triparty repo rate was 5.32% at 0939 IST, with the weighted average rate at 5.40%. In the more active triparty repo market, the rate ended at 5.27% Friday, with the weighted average rate at 5.47%.

The early demand for funds was likely due to reversal of Friday's three-day variable rate repo tender where market participants had borrowed INR 379.29 billion worth of funds, dealers said. Addditionally, market participants also needed cash to settle INR 280 billion worth of gilts bought at auction Friday. Primary dealers were major borrowers in the call market Monday, dealers said. 

"This is just early rush for the settlement, but we don't have any other IPOs (initial public offerring) today, so rates should come down in the second half," a dealer at a state-owned bank said. "There are no other outflows, so the demand will also be limited."

Rates are expected to ease below the repo rate later in the day as there are no significant outflows scheduled during the week, dealers said. The banking system liquidity surplus, as measured by the RBI's net liquidity absorbed, fell to INR 1.44 trillion Friday from INR 1.56 trillion on Thursday. However, liquidity surplus in the system was considered comfortable as there were no major scheduled outflows, they said. (Srijita Bose)

End

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

Edited by Ashish Shirke

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