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Informist, Thursday, Oct. 30, 2025

By Aaryan Khanna

NEW DELHI – The interbank call money market rate ended near the policy repo rate of 5.50% on firm demand for funds from banks due to credit growth amid tight liquidity. Some initial public offerings lined up this week and the next are also likely to draw funds away from the money markets, which also kept the triparty repo rate elevated near the repo rate, dealers said.

The one-day call rate ended at 5.45% Thursday, against 5.40% Wednesday. The weighted average call rate inched up to 5.57% from 5.56% Wednesday. The weighted average triparty repo rate was 5.47% Thursday, a tad down from 5.50% the previous day. 

The central bank's net absorption from the banking system--a proxy for a surplus--was INR 145.90 billion Wednesday, against 80.84 billion injected on Tuesday, a proxy for deficit in the system. Liquidity in the banking system returned to a surplus on Wednesday due to the government's month-end spending for its programmes, dealers said.

Liquidity conditions are expected to improve further by early next week due to the inflows, they said. However, the RBI's dollar sales to defend the rupee this week may weigh on liquidity and put pressure on money market rates.

The surplus was only possible as banks had drawn down their cash balances with the RBI held to fulfil cash reserve ratio requirements, dealers said. Banks held INR 8.45 trillion as cash reserves with the central bank Wednesday, against the average INR 8.64 trillion required for the fortnight ending Friday.

Money market rates have been anchored near the policy repo rate despite the tight liquidity conditions due to the RBI's constant support through variable rate repo auctions, though traders often remain unsure of the central bank's next steps, dealers said. The RBI held an overnight, INR-1.00-trillion VRR auction Thursday, where it got bids worth INR 1.21 trillion and accepted the notified amount. The maturity of Wednesday's overnight operation had drained INR 585.12 billion.

"Two-three days ago, the RBI came out with another VRR when the first one was fully subscribed. Today (Thursday), they didn't give any additional VRR", a dealer at a private-sector bank said. "So it is becoming difficult to gauge how much comfort he (RBI) wants to give, and what amount of flows he is aware of are coming."

OUTLOOK

On Friday, the three-day call money rate may open 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. The RBI has so far not announced a variable rate repo operation, which may lead to a rise in money market rates in the first half of trade on a reporting Friday. The reversal of the overnight variable rate repo auction held Thursday will drain INR 1.00 trillion of liquidity.

CALL RATE

5.45%--Thursday's close for one-day loans

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

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

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

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

Edited by Deepshikha Bhardwaj

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