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Informist, Tuesday, Oct. 28, 2025

By Aaryan Khanna

NEW DELHI – The interbank call money rate ended near the policy repo rate of 5.50% amid steady demand for funds from banks for loan disbursements during the festival season and a systemic liquidity deficit, dealers said. The Reserve Bank of India's variable rate repo operation early in the day helped to keep money market rates anchored near the repo rate, they said.

The one-day call rate ended at 5.55% Tuesday, against 4.95% Monday. The weighted average call rate was 5.56%, down slightly from 5.59% Monday. The weighted average triparty repo rate fell to 5.41% from 5.50% Monday.

The central bank's net injection into the banking system--a proxy for the systemic liquidity deficit--was INR 208.62 billion Monday, against a net absorption of INR 275.48 billion Sunday, which indicated a surplus. The RBI accepted all bids worth INR 1.26 trillion at the overnight, INR 1.50-trillion variable rate repo auction at a cut-off rate of 5.51%. Two variable rate repo auctions worth INR 1.02 trillion matured Tuesday.

Banks and primary dealerships met most of their early liquidity needs at the variable rate repo auction, which was instrumental in bringing the triparty repo rate down from around 5.50%, where it had hovered the past two days. Banks have been conservative in borrowing from the RBI's liquidity operations and have opted to borrow from mutual funds in the triparty repo market in recent weeks, dealers said. Banks likely reduced their dependency on the market as mutual funds are expected to face seasonal outflows at the month-end, they said.

Moreover, some banks may have begun receiving inflows from the government for its usual month-end payments for subsidies and salaries, easing liquidity in the banking system, dealers said. This is likely to add INR 500 billion-INR 700 billion to the banking system liquidity by next week. The next tranche of the cash reserve ratio cut will also bring down reserve requirements by around INR 700 billion in the fortnight beginning Saturday, further easing liquidity conditions, dealers said.

"It was already known that Monday would be a deficit. The RBI's VRRs are there, so that has really helped and there is no crisis for funds," a dealer at a private-sector bank said. "I think the worst of it is done. From tomorrow (Wednesday), month-end spending should begin to reflect in the system and help bring down rates."

OUTLOOK

Wednesday, the one-day call money rate may open near 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 overnight variable rate repo auction held Tuesday will drain INR 1.26 trillion of liquidity.

CALL RATE

5.55%--Tuesday's close for one-day loans

5.60%--Tuesday's open for one-day loans

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

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Above RBI's repo on tight liquidity amid higher credit offtake

MUMBAI – The interbank call money rate was above the Reserve Bank of India's repo rate due to tight liquidity conditions amid a pickup in credit offtake, dealers said. Rates are expected to fall after the INR 1.5-trillion variable rate repo auction, they said. 

The one-day call rate was at 5.60 at 0943 IST, against the close of 4.95% Monday. The weighted average call rate was at 5.64% at the same time. Meanwhile, rates in the triparty repo segment were at 5.51% at the same time, with the weighted average at the repo rate. 

As per the RBI's latest data, the central bank's net injection into the banking system – a proxy for systemic liquidity deficit – stood at INR 208.62 billion Monday, against a net absorption of INR 275.48 billion Sunday. This was largely due to INR 1.02 trillion worth of liquidity injected by the RBI though two VRR auctions Monday. Some dealers said the RBI's intervention in the foreign exchange spot market though dollar sales also likely led to a fall in rupee liquidity. 

"The liquidity is tight considering there have been CRR (cash reserve ratio) cuts as well," a dealer at a state-owned bank said. "But overall, there is good demand because credit offtake is better than what people were expecting earlier."

Demand for funds was firm Tuesday as credit offtake at individual banks picked up, dealers said. At Tuesday's INR 1.5-trillion VRR auction, INR 1.26 trillion was subscribed. Rates are expected to fall after majority of the VRR auction was subscribed, dealers said. However, some dealers said rates could remain up if demand from individual banks remains firm due to credit disbursements in the festival season, they said. The government's month-end inflows due to payment of salaries and pensions are expected to begin Tuesday, which could also bring down rates in the money market later in the session, dealers said.  (Srijita Bose)

End

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

Edited by Rajeev Pai

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