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Informist, Monday, Oct. 27, 2025

 

By Aaryan Khanna

 

NEW DELHI – The interbank call money rate ended below the Reserve Bank of India's Standing Deposit Facility rate of 5.25% on Monday, but market conditions were better characterised by the weighted average call rate being above the repo rate, dealers said. Amid tight liquidity conditions, demand for funds from banks and primary dealerships continued to keep pressure on rates despite the central bank's support.

 

The one-day call rate ended at 4.95% Monday, down from the three-day close of 5.72% Friday. The weighted average call rate was at 5.59%, similar to 5.58% Friday. The weighted average triparty repo rate was also at 5.50%, down from 5.52% on Friday.

 

"I think as a whole, all banks are a bit unsure of how to manage the liquidity during the festival season and the RBI intervention in FX (foreign exchange market)," a dealer at a state-owned bank said. "This is creating short-term mismatches and high rates." The RBI is said to be selling dollars to support the rupee, which has the impact of sucking out rupee liquidity from the financial system. 

 

The central bank's net liquidity absorbed from the banking system – a proxy for systemic liquidity surplus – was INR 275.48 billion Sunday against INR 267.35 billion Saturday, according to the latest data. While there were no outflows scheduled Monday, early demand from banks to generate credit during the festival season led to steady demand for funds through the day. 

 

The RBI held two overnight variable rate repo auctions Monday. At the first auction, the central bank set a cut-off of 5.51% and accepted bids worth the notified INR 1.00 trillion, against bids worth INR 1.45 trillion received. At the second auction, the RBI accepted all INR 17.88 billion bids against the notified amount of INR 500 billion, also at a 5.51% cut-off.

 

The latter auction was not well subscribed as mutual funds continued to lend cash in the triparty repo market around the repo rate. This may change starting Tuesday as significant initial public offerings are lined up this week that mutual funds will subscribe to, dealers said. However, the government's month-end spending of around INR 500 billion is expected to ease liquidity pressure after last week's outflows for goods and services tax payments.

 

OUTLOOK

On Tuesday, the one-day call money rate may open at or above the RBI's repo rate owing to tight systemic liquidity, dealers said. During the day, the rate is seen in the range of 4.90-5.70%, dealers said. Money market rates could ease after the RBI conducts a variable rate repo auction of INR 1.50 trillion at 0930-1000 IST. The reversal of the two overnight variable rate repo auctions held Monday will drain INR 1.02 trillion of liquidity.

 

CALL RATE

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

5.65%--Monday's open for one-day loans

5.72%--Friday's close for three-day loans

 

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	MONDAY	FRIDAY
Overnight	5.65	5.52
3-day	--	--
14-day	5.82	5.83
1-month	5.95	5.96
3-month	6.11	6.12

 

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India Call: Above RBI's repo rate on demand, liquidity seen insufficient

 

MUMBAI – The interbank call money rate above the Reserve Bank of India's repo rate Monday on demand for funds even as liquidity in the system turned to a surplus, dealers said. Some dealers were of the opinion that overnight rates could rise more after the overnight variable rate repo auction ends. 

 

The one-day call rate was at 5.65% at 0941 IST with the same weighted average rate, against the three-day close of 5.72% Friday. Rates in the triparty repo segment was at 5.52% at the same time. 

 

"There is still some cash crunch at individual bank levels after the Diwali and GST (goods and service tax) outflows," a dealer at a state-owned bank said. "This will improve during the week as month-end inflows start happening. But today, rates could go up more."

 

As per the RBI's latest data, the central bank's net absorption into the banking system – a proxy for systemic liquidity surplus – stood at INR 310.65 billion Friday, against a net injection of INR 26.46 billion Thursday. The liquidity surplus was due to INR 307.50 billion worth of subscription at Friday's three-day VRR auction. 

 

"Liquidity is not sufficient," a dealer at a private sector bank said. "There are some IPOs (initial public offers) also lined up during the week, so people will want to set aside some funds for that."

 

There are no major outflows scheduled during the day, dealers said. However, with the system liquidity seen insufficient, and demand from banks and primary dealerships, rates are expected to hover above the repo rate during the day, they said. 

 

Meanwhile, at Monday's INR 1-trillion VRR auction, market participants are expected to subscribe 80% of the auction, with the cut-off at 5.51%, according to a poll by Informist.  (Srijita Bose)

 

End

 

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

 

Edited by Saji George Titus

 

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