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Informist, Friday, Oct. 17, 2025

By Cassandra Carvalho

MUMBAI – The three-day interbank call money rate Friday ended at the Reserve Bank of India's repo rate on demand for funds for the reporting fortnight and outflows for goods and services tax payments, dealers said. The poor subscription at the RBI's INR 500-billion variable rate repo auction, along with settlement of the RBI's likely dollar sales Wednesday, also increased demand for funds, which pushed up rates even further due to lesser-than-usual lenders in the triparty repo market, dealers said.   

"Today I can't take a chance, I have to maintain a 100% (cash reserve)," a dealer at a state-owned bank said. "The difference between today and Monday is on Monday I'll have that flexibility to maintain my threshold at 90% or below 100%."

The three-day call rate ended at 5.50%, up from Thursday's one-day rate of 5.35%. Intraday, it hit a high of 5.98%. The weighted average call rate was 5.59%, up from 5.40% the previous day. Total volume in the call money market was INR 108.02 billion, down from INR 178.04 billion the previous day. The triparty repo rate closed at 5.75%, up from 5.25% the previous session. During the day it hit a high of 6.00%. The weighted average triparty rate was 5.53%, up from 5.32% Thursday. The surplus liquidity in the banking system, as measured by the RBI's net liquidity absorbed, was INR 1.41 trillion Thursday, up from 1.30 trillion Wednesday.

During the day, rates jumped above repo in the call, triparty repo and repo markets, leading to some panic among traders. Mutual funds were not aggressively lending in the triparty repo market, since they were likely bidding for issuances in the corporate bond primary market, dealers said. State Bank of India Friday accepted bids aggregating to INR 75 billion on its 10-year Basel-III-compliant tier-II bonds maturing on Oct. 20, 2035, dealers told Informist. The issue, which had a base size of INR 50 billion and a greenshoe option of INR 25 billion, was fully subscribed.

Volumes in the call money and triparty repo markets were low as the number of borrowers exceeded the number of lenders due to lack of funds. Those who were willing to lend were doing so at high rates, dealers said.

RBI-administered markets are shut on Tuesday and Wednesday for Diwali. Most dealers expect GST payments by banks to start Monday, with majority of the outflows expected on Oct. 23. Some traders also said banks had started small quantum of payments for goods and services tax, since the RBI is shut on Oct. 21, the day the outflows usually start every month. 

"People have started the payments now itself because next week (there are) so many holidays," said a trader at a primary dealership. "Liquidity problem will be there (next week) because of GST and for festive season while for lending or borrowing many people will be on leave."

Outflows or cash withdrawals of up to INR 350 billion are also expected for Diwali, which could be higher due to GST rate cuts aimed at boosting consumer spending, according to dealers. Corporates withdrew money for festive requirements while loan disbursement was also large Friday, dealers said.

OUTLOOK

* On Saturday, the two-day call rate may open near the RBI's repo rate owing to demand for funds as goods and services tax payment outflows are likely to drain system liquidity, dealers said.

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

* On Monday, the RBI will conduct a four-day variable rate repo auction for INR 1.75 trillion at 0930-1000 IST. The reversal of the three-day variable rate repo auction of INR 27.50 billion is due Monday.

CALL RATE

5.50%--Friday's close for three-day loans

5.55%--Friday's open for three-day loans

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

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Above MSF on fund demand on reporting Fri, less lenders in TREPS

MUMBAI – The three-day interbank call money rate last traded at 5.95%, 20 basis points higher than the Reserve Bank of India's Marginal Standing Facility rate due to demand for funds for the fortnightly reporting Friday, which increased due to lesser-than-usual lenders in the triparty repo market, dealers said. At 1425 IST, a trade of INR 5.00 billion was conducted at a rate of 5.95% in the call money market, according to data from Clearing Corp. of India. The last traded rate in the TREPS market was also 5.95%, which hit the day's high of 6.00%. 

"Today (Friday) is the last day of the fortnight. We are now close to the end of market hours in TREPS and CROMS and volume is also very low in TREPS so (traders) shifted to call," a dealer at a state-owned bank said. "We can see the borrower amount, there's demand for money there, but no one is supporting that at the level that is required, (so) rates are very high."

Mutual funds refrained from lending in the triparty repo market, dealers said. Traders speculated that mutual funds likely invested in primary issuances in the corporate bond market. Additionally, since the triparty repo market shuts at 1600 IST, traders in TREPS wound down their operations and shifted to borrowing from the call money market. Quotes for borrowing were high in both markets while lenders refrained from accepting the quotes due to lack of funds, dealers said.  

In the reporting fortnight started Oct. 4 and up to Oct. 16, banks have maintained an average cash balance of INR 8.51 trillion with the RBI, against the requirement of INR 8.47 trillion. Poor subscription at the RBI's INR-500-billion variable rate repo auction Friday also heightened demand for funds. The central bank took all bids worth INR 27.50 billion at the auction. The subscription was low since traders relied on the triparty repo market, wherein rates were lower at the time of auction, dealers said.

Traders expect the central bank to conduct another VRR auction Monday, to the tune of INR 500 billion to INR 1.00 trillion due to outflows for goods and services tax payments. Of the approximately INR-1.7-trillion outflows expected for GST payments, minor payments will start Monday itself, while the majority will likely be paid on Thursday, dealers said. RBI-administered markets are shut Tuesday and Wednesday for Diwali. (Cassandra Carvalho) 

India Call: Above RBI's repo rate on early demand for funds; VRR result eyed

NEW DELHI – The three-day interbank call money rate was above the Reserve Bank of India's repo rate of 5.50% due to early demand for funds from primary dealerships ahead of the weekly gilt auction and from banks on their reporting Friday, dealers said. Banking system liquidity is likely to fall Friday as the RBI's spot dollar sales on Wednesday, estimated at $3.5 billion-$4 billion, are settled. Dealers look ahead to the result of the central bank's three-day variable rate repo auction for INR 500 billion, being held at 0930-1000 IST, which is likely to cushion the hit from the foreign exchange operations, dealers said.

At 0945 IST, the three-day call rate was at 5.55%, against 5.35% at Thursday's close for one-day loans. The weighted average call rate was also 5.55%. The total volume in the call money market was INR 50.27 billion at 0930 IST, down from INR 66.57 billion at the same time Thursday. The triparty repo rate was 5.45% at 0945 IST, with the weighted average rate at 5.42%.

The banking system liquidity surplus, as measured by the RBI's net liquidity absorbed, rose to INR 1.41 trillion Thursday, from INR 1.30 trillion Wednesday. Some traders speculated it was to offset the impact of its recent dollar sales to support the rupee, while others said the central bank wanted to provide liquidity comfort to the market ahead of the goods and services tax outflows likely on Monday. There was still some confusion on the actual date of the outflows, which typically occur on the 21st of every month. Tuesday, Oct. 21, is holiday for Diwali and so the outlows may take place on either Monday or Thursday, when the market opens again.

"My sense is that the RBI wants to make sure that liquidity is not in a tight spot because of its FX operations, because the market has varying numbers for how much it sold in spot, forwards and then NDF (non-deliverable forwards) which will have no impact on onshore liquidity," a dealer at a private sector bank said. "Right now, we can only speculate what the actual impact is, since we'll only get an idea of the net impact from the liquidity number for today (Friday, which will be released Monday)."

Still, some banks may skip participating in the VRR auction as the triparty repo rate was below the minimum cut-off rate at the auction, of 5.51%. If the auction is little subscribed, it is likely to put upward pressure on money market rates later in the day, especially ahead of the weekend, dealers said.

Some banks are likely to be lagging on their cash reserve requirements on the reporting Friday as well, and were likely to borrow both from the central bank and the money market, dealers said. In the current reporting fortnight started Oct. 4 and up to Thursday, banks have maintained an average cash balance of INR 8.51 trillion with the RBI, against the requirement of INR 8.47 trillion. (Aaryan Khanna)

End

US$1 = INR 87.98

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

Edited by Ashish Shirke

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