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Informist, Tuesday, Nov. 4, 2025

 

By Aaryan Khanna

 

NEW DELHI – The interbank call money market rate ended sharply below the Reserve Bank of India's Standing Deposit Facility rate of 5.25% due to comfortable liquidity conditions, dealers said. The abundant liquidity kept rates below the repo rate for most of the day, except in the early hours, when primary dealers were borrowing to meet their requirements. 

 

The two-day call rate ended at 4.95%, against 5.00% for one-day loans Monday. Money markets are shut on Wednesday for Guru Nanak Jayanti. The weighted average call rate Tuesday was 5.42%, the same as the previous day. The weighted average rate in the wider triparty repo market, which includes mutual funds, was 5.20% Tuesday, unchanged from the previous day.

 

The central bank's net absorption from the banking system – a proxy for liquidity surplus – was INR 1.75 trillion on Monday, the most in a month. RBI's net absorption was INR 1.11 trillion Sunday. The liquidity surplus has been above the INR 1-trillion mark since Friday due to the government's month-end inflows for salaries and pension payments, dealers said. Additionally, the cut in the cash reserve ratio to 3.25% of net demand and time liabilities of banks, which came into effect Saturday, has freed up INR 700 billion of liquidity.

 

Liquidity in the system is expected to remain comfortable this week with no major outflows scheduled until Friday, dealers said. Outflows due to payment of excise duty and tax deducted at source are expected to drain liquidity from the system by the end of the week, but are unlikely to push the triparty repo rate above the repo rate, dealers said. 

 

Some dealers said RBI's dollar sales to protect the domestic currency are leading to a continuous reduction in rupee liquidity in the banking system, which could lead to a fall in the liquidity surplus during the week. Mutual funds' investments in initial public offerings this week have so far not disrupted money market conditions, and they continue to be lenders in the triparty repo market, dealers said.

 

OUTLOOK

Money markets are shut on Wednesday for Guru Nanak Jayanti. The one-day call money rate may open near the RBI's repo rate Thursday due to early demand for funds from primary dealerships, dealers said. Some traders expect the central bank to conduct a variable rate reverse repo auction for up to INR 500 billion if weighted average money market rates move to the SDF rate of 5.25%

 

During the day, the call money rate is seen in the range of 4.90-5.60%, dealers said. Activity by banks and mutual funds in initial public offerings may lead to volatility in money-market rates, dealers said.

 

CALL RATE

4.95%--Tuesday's close for two-day loans

5.50%--Tuesday's open for two-day loans

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

 

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	TUESDAY	MONDAY
Overnight	5.49	5.49
3-day	--	--
14-day	5.84	5.84
1-month	5.92	5.92
3-month	6.10	6.11

---

India Call: Above RBI's repo rate on early demand for funds

 

MUMBAI – The interbank call money rate was above the Reserve Bank of India's repo rate of 5.50% on early demand for funds, dealers said. Overnight rates are expected to fall during the day as liquidity surplus in the system turned comfortable owing to the government's payment of salaries and pensions, and a cut in the cash reserve ratio which came into effect Saturday. 

 

At 0942 IST, the two-day call was at 5.55%, with the weighted average call rate at 5.50%, against a close of 5.00% for one-day loans Monday. The rate in the triparty repo segment was trading at 5.24% at the same time, with the weighted average rate at 5.23%. 

 

The central bank's net absorption from the banking system – a proxy for liquidity surplus – was INR 1.75 trillion on Monday, up from INR 1.11 trillion Sunday. The liquidity surplus has been above the INR 1-trillion mark since Friday due to the government's month-end inflows for salaries and pension payments, dealers said. Additionally, a cut in the cash reserve ratio to 3.25% of net demand and time liabilities of banks came into effect Saturday and freed up INR 700 billion of liquidity.

 

"We are at a comfortable position right now and this week, I think rates should remain supported since there are not major outflows" a dealer at a private sector bank said. "Some flows due to IPOs (initial public offers) can be seen but that too is not going to have any major crunch."

 

Liquidity in the system is expected to remain comfortable this week, dealers said. Outflows due to payment of excise duty and tax deducted at source are expected to drain liquidity from the system by the end of the week, but may not have a major impact, dealers said. 

 

Some dealers said RBI's dollar sales to protect the domestic currency is leading to a continuous reduction in rupee liquidity in the banking system, which could lead to some fall in the liquidity surplus during the week. Meanwhile, demand for funds as market participants bid for initial public offerings is also expected to limit the fall in rates, dealers said.  (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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