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Informist, Wednesday, Oct. 29, 2025

By Aaryan Khanna

NEW DELHI – The interbank call money rate ended near the policy repo rate in a last minute trade Wednesday, after trading at the Marginal Standing Facility rate right near 1900 IST likely due to a bank looking to meet its funding requirements for loan disbursements during the festival season amid a systemic liquidity deficit, dealers said. Early demand for funds still kept the weighted average call rate above the repo rate for the fourth straight day even after the Reserve Bank of India's variable rate repo operation early in the day.

The one-day call rate ended at 5.40% Wednesday, against 5.55% Tuesday, after being at 5.75% on the Clearing Corp. of India's website at 1900 IST. The weighted average call rate was 5.56%, unchanged from Tuesday.

The central bank's net injection into the banking system--a proxy for a deficit--was INR 80.84 billion Tuesday, against 208.62 billion Monday. Banking system will likely return to a surplus in Wednesday's data due to the government's month-end spending for its programmes, dealers said. This also helped bring down the demand for funds at the variable rate repo auction Wednesday, they said.

The RBI accepted all bids worth INR 585.12 billion at the overnight, INR 1.50-trillion variable rate repo auction at a cut-off rate of 5.51%. A variable rate repo auction worth INR 1.26 trillion matured Wednesday. The lower subscription was expected, though banks tapped the triparty repo market to meet the shortfall and pushed up rates there, dealers said. The weighted average triparty repo rate rose to 5.50% from 5.41% the previous day. The spread between the weighted average call rate and triparty repo rate is expected to remain below 10 basis points until early next week as mutual funds are likely to face seasonal outflows at the month-end, dealers said.

"Month-end spending has hit the market but the situation is still not good enough for rates to move below the repo rate," a dealer at a state-owned bank said. "I think everyone is now used to trading around the repo rate only, whether it is 5 basis (points) higher or lower."

The month-end spending 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.

OUTLOOK

On Thursday, 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 1.00 trillion at 0930-1000 IST. The reversal of the overnight variable rate repo auction held Wednesday will drain INR 585.12 billion of liquidity.

CALL RATE

5.40%--Wednesday's close for one-day loans

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

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

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Above repo rate on demand amid steady loan disbursements

MUMBAI – The interbank call money rate on Wednesday traded above the Reserve Bank of India's repo rate as liquidity in the banking system continued to be tight, dealers said. Demand for funds due to a pick up in credit offtake also kept rates up, they said.

The one-day interbank call rate traded at 5.65% at 0946 IST with the same weighted average rate, against a close of 5.55% Tuesday. At the same time, the triparty repo rate was trading at 5.49%, with 5.48% as the weighted average rate. 

Steady demand for funds from banks for loan disbursements during the festival season kept rates up, dealers said. Some state-owned banks and primary dealers were likely on the borrowing side, dealers said.

"There are no major outflows today (Wednesday) other than the settlement for state bonds," a dealer at a private sector bank said. "But credit offtake continues to be good so there is good demand for funds, and the month-end inflows have also not been much."

The central bank's net injection into the banking system--a proxy for the systemic liquidity deficit--was INR 80.84 billion Tuesday, against 208.62 billion Monday. At Wednesday's INR 1.5-trillion variable rate repo auction, dealers expect INR 1 trillion to be subscribed. Rates may fall later in the day as over 60% of the VRR auction is subscribed, dealers said.

Some banks have begun receiving inflows from the government for its usual month-end payments for subsidies and salaries, some 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.  (Srijita Bose)

End

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

Edited by Vandana Hingorani

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