More Stories

Informist, Thursday, Oct. 16, 2025

By Cassandra Carvalho

MUMBAI – The one-day interbank call money rate Thursday ended below the Reserve Bank of India's repo rate as demand for funds was low due to a lack of significant outflows during the day, dealers said. Some traders expected the central bank to hold an overnight variable rate reverse repo auction, as money market rates were closer to the RBI's Standing Deposit Facility rate. The central bank usually prefers rates closer to the repo rate, dealers said. 

The one-day call rate ended at 5.35% against Wednesday's rate of 5.00%. The weighted average call rate for the day was 5.40%, up from 5.37% the previous day. The total volume in the call money market was INR 178.04 billion, slightly down from INR 189.44 billion the previous day. The triparty repo rate closed at 5.25%, with the weighted average rate at 5.32%, the same as Wednesday. The surplus liquidity in the banking system, as measured by the RBI's net liquidity absorbed, was INR 1.30 trillion Wednesday, compared to INR 1.28 trillion Tuesday.

An erroneous trade in the call money market took the rate to the day's high of 6.10%--60 bps above repo, dealers said. At 1553 IST, a trade for INR 180 million was conducted at a rate of 6.10%, according to the data from Clearing Corp. of India. Dealers said it was likely a fat-finger trade, which was supposed to be conducted at 5.10%.  

"Money is available easily, throughout the day we've borrowed and lent at 5.40%-5.50% only, so it (the 6.10% trade) must be an error," a dealer at a state-owned bank said. "I'm not sure if this can be solved. I think both parties may have to approach CCIL (Clearing Corp. of India)."

On the liquidity front, traders are awaiting the central bank's liquidity management operation announcement ahead of the expected outflows for Diwali and goods and services tax payments starting next week. This week, requirements for fortnightly reporting Friday may drive demand for funds, dealers said. Post-market hours, the central bank announced a three-day variable rate repo auction for INR 500 billion. Some traders are also expecting around INR 200 billion–INR 400 billion worth of outflows Friday due to the T+2 settlement of the RBI's dollar sales in the foreign exchange spot market Wednesday. 

Some traders were expecting a variable rate reverse repo announcement for Friday, due to rates falling closer to SDF than repo in money markets, and due to redemption of the central bank's INR-250-billion, two-day variable rate reverse repo auction of INR 162.85 billion due Friday. 

"If you see, there were no lenders later on in the market," a trader at a primary dealership said. "They were holding onto their funds in expectation of VRRR. But I don't think RBI will announce VRRR because GST outflows are starting."

Outflows or cash withdrawals of up to INR 350 billion are expected for Diwali, which could be higher due to GST rate cuts aimed at boosting consumer spending, according to dealers. Since the GST cut took effect on Sept. 22, GST payments by banks starting next week could be slightly lower at around INR 1.7 trillion, compared to the usual INR 1.8 trillion to INR 2 trillion, dealers said. RBI-administered markets are shut on Tuesday and Wednesday for Diwali.

OUTLOOK

* On Friday, the three-day call rate may open near the RBI's repo rate owing to demand for funds from primary dealerships in early trade ahead of the weekly gilt auction, especially due to a likely liquidity drain from settlement of the RBI's intervention in the foreign exchange market Wednesday, dealers said. Later in the day, rates may ease due to the RBI's 3-day VRR auction. Traders will track subscriptions at initial public offerings of companies after money market rates shot up last week due to funds locked up in IPOs, dealers said.

* The RBI will conduct a three-day variable rate repo auction for INR 500 billion at 0930-1000 IST Friday. The reversal of the two-day variable rate reverse repo auction of INR 162.85 billion is due Friday.

* During the day, the three-day call money rate is seen in the range of 4.90-5.70%, dealers said.

CALL RATE

5.35%--Thursday's close for one-day loans

5.45%--Thursday's open for one-day loans

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

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Below RBI's repo on lack of major outflows

MUMBAI – The one-day interbank call money rate was below the Reserve Bank of India's repo rate of 5.50% on lack of major outflows, dealers said. Rates are expected to remain around the current rate during the day unless the RBI conducts any variable rate reverse repo auctions, as demand for funds is not seen aggressive, they said.

At 0929 IST, the one-day call rate was at 5.45%, against 5.00% at Wednesday's close. The weighted average call rate was 5.37%. Total volume in the call money market was INR 66.57 billion at 0930 IST, slightly higher than INR 60.43 billion Wednesday. The triparty repo rate was 5.38% at 0929 IST, with the weighted average rate at 5.36%.

"If there is no VRRR today, then I think rates will be here only because there are no major flows today," a dealer at a private sector bank said. "Also at these levels, liquidity is already expected to come down more, so I don't think they (the RBI) should bring any VRRR right now." The RBI accepted all offers worth INR 162.85 billion at a INR 250-billion two-day VRRR auction on Wednesday, which will reverse on Friday.

The banking system liquidity surplus, as measured by the RBI's net liquidity absorbed, was up slightly at INR 1.30 trillion Wednesday compared to INR 1.28 trillion Tuesday. Some traders expect this figure to fall further Friday, as some of the central bank's dollar sales in the foreign exchange spot market on Wednesday is settled. Traders are closely tracking the movement of the rupee against the dollar for any signs of a drain in systemic liquidity. 

"I think ballpark around $5 billion was sold yesterday, so some of it done in spot could impact liquidity tomorrow," a dealer at a state-owned bank said. "Today, rates should be within repo because there are no outflows other than the T-bills to be settled."

Dealers are also eyeing the liquidity outflows expected next week due to cash withdrawals during Diwali and outflows for goods and services tax payments. Outflows or cash withdrawals to the tune of INR 350 billion are expected for Diwali, which could be higher due to the Centre's incentives to boost consumer spending in the form of the recent cut in the goods and services tax, dealers said. Since the GST cut took effect on Sept. 22, GST payments by banks starting next week could be slightly lower than usual at around INR 1.7 trillion, compared to the usual estimate of INR 1.8 trillion to INR 2 trillion, dealers said. (Srijita Bose)

End

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

Edited by Saji George Titus

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2025. All rights reserved.