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Informist, Thursday, Oct. 23, 2025

By Srijita Bose

MUMBAI – The interbank call money rate ended sharply below the Reserve Bank of India's standing deposit facility rate as demand for funds cooled towards the end of the day, dealers said. The RBI infusing liquidity through variable rate repo auctions also gave the market comfort and kept broader money market rates from rising above the repo rate, they said.

The one-day call rate ended at 5.00%, down sharply from Monday's three-day rate of 5.62%. The weighted average call rate was 5.46%, down from 5.61% Monday. The rate in the triparty repo segment also ended at 5.00%. The weighted average triparty repo rate cooled to 5.27% Thursday from 5.44% Monday after the RBI held an overnight variable rate repo auction of INR 500 billion. Traders, however, borrowed only INR 4.75 billion through the auction as rates in the broader triparty repo segment were below the RBI's repo rate, dealers said. Some dealers said mutual funds had extra cash after Diwali withdrawals had ended and chose to lend in the market at lower rates.

"Mutual funds were actively lending today, which kept rates lower," a dealer at a private-sector bank said. "Diwali is over and most of the GST (goods and services tax) outflows are also done, so the demand faded later in the day." 

Meanwhile, liquidity in the banking system turned into deficit Monday for the first time since Sept. 24. The RBI net injected over INR 500 billion liquidity daily since Monday, against INR 464.46 billion absorbed Sunday. The net injection of liquidity by the RBI is a proxy for the deficit in the banking system.

Some dealers said payments for GST were nearly done and pegged the total drain on liquidity on account of these payments at INR 1.8 trillion, which primarily resulted in liquidity in the banking system going into deficit. However, others said that though the major outflows were done, some minor payments of GST could result in a further fall in liquidity in the system Friday.

Dealers also expected the RBI to conduct another variable rate repo auction Friday, which would prevent money market rates from rising sharply above the repo rate. After market hours, the RBI announced that it will conduct a three-day variable rate repo auction worth INR 1.25 trillion Friday. The RBI's four-day variable rate repo auction conducted Monday is also set to be reversed Friday, which will drain INR 1.51 trillion of liquidity from the system.

OUTLOOK

Friday, the three-day call money rate may open near the RBI's repo rate owing to tight systemic liquidity after GST-related outflows, dealers said.

During the day, the three-day call money rate is seen in the range of 4.90-5.70%, dealers said. Money market rates could ease after the RBI conducts a three-day variable rate repo auction of INR 1.25 trillion at 0930-1000 IST. The reversal of the overnight variable rate repo auction held Thursday will drain INR 4.75 billion of liquidity.

CALL RATE

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

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

5.62%--Monday's close for three-day loans

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: At RBI's repo rate as liquidity in deficit after almost a month

NEW DELHI – The interbank call money rate was at the Reserve Bank of India's repo rate of 5.50% due to early demand for funds from primary dealerships as banking system liquidity slipped into a deficit for the first time in a month. Dealers said the result of the RBI's variable rate repo auction showed there was adequate supply of funds in the triparty repo market, but may put pressure on rates later in the day.

At 1025 IST, the one-day call rate was 5.50%, against 5.62% at close for three-day loans Monday. Money markets were shut on Tuesday and Wednesday for Diwali. The weighted average call rate was 5.50%, against 5.61% Monday. Trade volume in the call money market was INR 72.02 billion at 1025 IST, against INR 83.23 billion at 1030 IST Monday.

The central bank net injected INR 701.70 billion of liquidity into the banking system Monday, according to latest data, with the proxy showing a deficit for the first time since Sept. 24. On Sunday, the RBI had absorbed INR 464.46 billion.

The sharp swing was due to payments for goods and services tax aggregating to around INR 1.5 trillion, as well as settlement of last week's government bond auction of INR 300 billion. Moreover, the RBI's rupee-liquidity-draining spot dollar sales from last week settled Monday, dealers said. These sales are likely to ebb in the coming days on positivity over a US-India trade deal, limiting its impact on banking system liquidity this week, dealers said. 

The RBI had already extended support by conducting a four-day VRR auction Monday, where it accepted all INR 1.51 trillion bids. It further conducted a three-day auction later in the day, accepting bids worth INR 120 billion. At the reversal on Thursday, it conducted an overnight, INR-500-billion VRR auction, which got a meagre subscription of INR 4.75 billion.

Traders said this was due to sufficient liquidity with mutual funds, keeping the triparty repo rate lower. The triparty repo rate was at 5.33% at 1025 IST, with a weighted average of 5.39% against 5.44% Monday. 

However, since banks are likely to tap the triparty repo market to meet their liquidity needs, rates are likely to rise later in the day. There may be a rise in call money market rates after 1600 IST as well, when the triparty repo market closes, dealers said.

"It's already Thursday today, so again weekend liquidity management will have to be done," a dealer at a private sector bank said. "People have met the Diwali rush but it is not over yet, and so we could see a few different things happening today depending on the VRR auction."  (Aaryan Khanna)

End

US$1 = INR 87.84

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

Edited by Rajeev Pai

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