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Informist, Monday, Nov. 17, 2025

 

By Cassandra Carvalho and J. Navya Sruthi

 

MUMBAI – The one-day call money rate ended below the Reserve Bank of India's standing deposit facility rate Monday on low demand for funds amid ample surplus liquidity, dealers said. Other than INR 280 billion as settlement of Friday's weekly gilts auction, no other outflows were scheduled for the day, dealers said.

 

Till 1930 IST, no variable rate reverse repo auction had been announced by the RBI for Tuesday. Several traders were expecting an overnight auction of around INR 1.00 trillion to roll over the three-day VRRR auction conducted Friday as liquidity is in ample surplus. The redemption of INR 573.80 billion of the RBI's INR 1.00-trillion, three-day VRRR auction Friday was due Monday. Traders speculated that the central bank did not announce a roll-over auction because payments for goods and services tax are due later in the week.

 

"There are low chances of another VRRR due to GST outflows this week. While the GST outflows are later this week, (their) implication will be throughout the week as a few corporates start (paying GST) early," a dealer at a state-owned bank said. The dealer sees rates at 5.30-5.35% for the next day or two on comfortable liquidity surplus in the banking system.

 

Outflows to the tune of INR 1.8 trillion are expected between Wednesday and Saturday for GST payments, dealers said. However, in spite of the outflows, money market rates are not seen rising above the repo because of ample surplus liquidity, unless the RBI conducts a VRRR auction on one of the days of the outflows. The central bank's net absorption from the banking system--a proxy for the liquidity surplus--was INR 1.81 trillion Sunday, similar to Saturday, but down substantially from INR 2.40 trillion Friday. The liquidity surplus fell below INR 2 trillion after having been above this level since Nov. 4.

 

Traders said the liquidity drop was likely due to an increase in the cash reserve requirement in the fortnight that began Saturday. For the fortnight ending Nov. 28, banks' average daily cash reserve requirement is INR 8.06 trillion, up from INR 7.97 trillion for the fortnight ended Friday. Banks maintained INR 8.48 trillion Sunday, up from INR 7.88 trillion Friday.

 

State-owned banks were largely on the lending side during the day, dealers said. "There is not much demand we see in the market," another dealer at a state-owned bank said, "as the liquidity remains in surplus and the rates are also trading lower than SDF rate."

 

The one-day call rate ended at 4.95%, against Saturday's close of 5.00% for two-day loans. The weighted average call rate was 5.36%, up from 5.01% Saturday. The weighted average rate in the wider tri-party repo market, which includes mutual funds, rose to 5.21% from 5.17% in the previous trading session.

 

OUTLOOK

* On Tuesday, the one-day call money rate may open below the RBI's repo rate owing to the lack of any major outflows amid ample surplus liquidity in the banking system, dealers said. Several traders expect a variable rate reverse repo auction to be held Tuesday and will look out for any announcement of the same. Later in the week, demand for funds may rise as outflows for GST payments are likely to drain system liquidity, dealers said.

* During the day, the one-day call money rate is seen in the range of 4.85-5.50%, dealers said. 

 

CALL RATE

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

5.45%--Monday's open for one-day loans

5.00%--Saturday's close for two-day loans

 

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	MONDAY	FRIDAY
Overnight	5.43	5.58
3-day	--	--
14-day	5.84	5.83
1-month	5.92	5.92
3-month	6.10	6.10

 

---

India Call: Near repo on early need; lack of VRRR keeps rate capped at repo

 

MUMBAI/NEW DELHI – The one-day interbank call money rate was near the Reserve Bank of India's repo rate of 5.50% due to early demand from primary dealerships. Some banks were also in need of funds early in the day after participating in initial public offerings last week, dealers said. Call money rates are expected to be capped at the repo rate due to lack of variable rate reverse repo auction Monday, as well as lack of large scheduled outflows, they said. 

 

At 1035 IST, the one-day call rate was at 5.45%, against 5.00% at close for two-day loans Saturday. The triparty repo rate at the same time was 5.22%, with a weighted average rate of 5.25%. 

 

"The rates are near the repo because of PDs (primary dealers') usual requirement for bonds," a dealer at a private sector bank said. "Some of our funds are also parked for an IPO from Friday, which will be reversed only by tomorrow (Tuesday), that has led to some rebalance in liquidity amongst banks."

 

Dealers expect money market rates to trend towards the Standing Deposit Facility rate of 5.25% later in the day due to the significant liquidity surplus. The central bank's net absorption from the banking system – a proxy for liquidity surplus – was INR 2.40 trillion Friday, largely steady from that on Thursday. This liquidity surplus has been about INR 2 trillion since Nov. 4. 

 

The lack of a VRRR auction helped keep rates in check, after the call money rate shot to above the repo rate early Friday due to the RBI's liquidity draining operation and banks' needs for cash reserve ratio requirements. On Friday, the RBI held a three-day VRRR auction for INR 1.00 trillion, the first auction since Oct. 15. It received and accepted all offers worth INR 573.80 billion Friday but did not follow it up with such an action for Monday.

 

Traders had mixed views on whether the RBI would conduct another such auction this week. Some traders said that it might conduct an overnight auction if the triparty repo rates fall below 5.15%, as they had on Thursday. Others said the central bank would avoid such a move only a day or two before goods and services tax payments to the government will drain upwards of INR 1.5 trillion from the banking system starting Thursday.

 

"The liquidity needs to be around this level to drive the market... we can see volumes in gilts with the current liquidity, so it is unlikely for another VRRR as we also have GST (goods and services tax) outflows around Nov. 20," a dealer at a state-owned bank said.  (J. Navya Sruthi and Aaryan Khanna)  End

 

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

 

Edited by Rajeev Pai

 

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