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Informist, Wednesday, Nov. 19, 2025

 

By Cassandra Carvalho

 

MUMBAI – The one-day interbank call money market rate ended below the Reserve Bank of India's standing deposit facility rate Wednesday as demand for funds early in the day eased amid ample surplus liquidity even as outflows for goods and services tax payments likely commenced, dealers said. Outflows to the tune of INR 1.7 trillion are expected, with some traders expecting over INR 2.00 trillion since the Centre's cut in goods and services tax effective Sept. 22 has boosted consumption, dealers said. Of this, a minor quantum would have been paid Wednesday.

 

However, rates remained below the repo rate and largely around SDF due to comfortable liquidity in the system, dealers said. The central bank's net absorption from the banking system – a proxy for liquidity surplus – was INR 1.75 trillion Tuesday, down from INR 1.88 trillion Monday. By the end of next week, inflows from the final tranche of funds from the four-stage, 100-basis point cut in the cash reserve ratio, along with government expenditure at the end of the month, are likely to boost systemic liquidity further, dealers said.

 

Expectations of a rate cut by the RBI's Monetary Policy Committee are gaining momentum, dealers said. "It seems like there will be a rate cut because even in your three-month OIS (overnight indexed swap rate), suddenly there was receiving (fixed rates) yesterday (Tuesday) after days of paying," a dealer at a private sector bank said. Some traders see the lack of a variable rate reverse repo announcement so far this week as an indication that the RBI is loosening its grip on holding the weighted average call money rate at the repo rate.

 

Arbitrage trades continued, though the spread between rates is decreasing, dealers said. "We're getting a 3-4 bps spread between TREPS and SDF but with CCIL (Clearing Corp. of India) charges, some of the profit is gone. So we're barely getting anything out of these trades. But banks are doing it, those who have the capability to do it," a dealer at a primary dealership said.

 

The one-day call rate ended at 5.00%, the same as Tuesday's close. The weighted average call rate was 5.38%, a steady rise from 5.37% Tuesday and 5.36% Monday. The weighted average rate in the wider tri-party repo market, which includes mutual funds, was 5.20%, the same as the previous trading session.

 

OUTLOOK

* On Thursday, the one-day call money rate may near the RBI's repo rate as outflows for GST payments drain systemic liquidity, dealers said. Expectations of a variable rate reverse repo auction announcement have reduced and any such announcement will be unexpected and thereby push up money market rates. Some traders who expect GST outflows of around INR 2.00 trillion expect a variable rate repo auction.

* During the day, the one-day call money rate is seen in a range of 4.85-5.60%, dealers said.

 

CALL RATE

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

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

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

 

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	WEDNESDAY	TUESDAY
Overnight	5.44	5.44
3-day	--	--
14-day	5.84	5.84
1-month	5.92	5.92
3-month	6.10	6.10

 

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India Call: Near repo on early demand for funds; mkt sees VRR on GST payments

 

MUMBAI – The one-day interbank call money rate was at the Reserve Bank of India's Standing Deposit Facility rate of 5.25?ter an early demand for funds from private-sector banks and primary dealerships was met near the repo rate, dealers said. They said the RBI may come up with a variable rate repo auction later this week as the liquidity surplus in the system and outflows scheduled for goods and services tax payments are almost the same. 

 

The market was expecting a variable rate reverse repo auction by the RBI till Tuesday due to higher surplus liquidity in the banking system and a tepid response to last week's auction. However, those expectations are gone with GST payments beginning Wednesday that will drain INR 1.7 trillion to INR 2 trillion by the weekend, dealers said.

 

"GST payments and surplus are almost similar, so RBI may come with VRR (auction) after today's (Wednesday's) GST outflows," a dealer at a state-owned bank said. "It is unlikely that RBI will conduct a VRRR now."

 

The central bank's net absorption from the banking system – a proxy for liquidity surplus – was INR 1.75 trillion Tuesday, down from INR 1.88 trillion Monday. The average daily cash balance with the Reserve Bank of India as on Tuesday was INR 8.38 trillion, higher than the average daily cash reserve of INR 8.06 trillion required for the fortnight ending Nov. 28.

 

At 1030 IST, the one-day call rate was at 5.25%, against 5.00% at Tuesday's close. The weighted average call rate was 5.45%, up from 5.37% Tuesday. The tri-party repo rate was at 5.24%, with a weighted average rate of 5.21%.

 

Dealers said call money rates for the day are expected to trade below the repo rate after the initial demand was met. However, the weighted average triparty repo rate may rise from 5.20% Tuesday as banks may tap the broader market, which includes mutual funds, to meet their funding needs amid the GST outflows. 

 

"Currently, it is very uncertain about TREPS market, the 5-day rate is at 5.45%, rates may also go to repo level because of GST outflows. But we can get clarity on this by 1100 (IST)," a dealer at a private sector bank said.   End

 

US$1 = INR 88.58

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

 

Edited by Ashish Shirke

 

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