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Informist, Thursday, Nov. 20, 2025

 

By Cassandra Carvalho

 

MUMBAI – The one-day interbank call money market rate ended below the Reserve Bank of India's repo rate Thursday. Money market rates rose slightly as payments of anywhere between INR 300 billion and INR 700 billion for goods and services tax were made Thursday, according to dealers. After market hours, the RBI said it will conduct a seven-day variable rate repo auction of INR 500 billion Friday, which may cap a rise in rates above the repo rate on a day when a significant chunk of GST payments are expected to be made, dealers said.  

 

The one-day call rate ended at 5.40%, up sharply from Wednesday's close of 5.00%. The weighted average call rate was 5.41%, against 5.38% Wednesday. The weighted average rate in the wider tri-party repo market, which includes mutual funds, was 5.27%, also up from 5.20% at the end of the previous trading session.

 

Outflows to the tune of INR 1.7 trillion are expected for GST payments from Wednesday till Monday. Some traders expect the outflows to top INR 2.0 trillion as the cut in GST rates effective Sept. 22 has boosted consumption, dealers said. Around INR 500 billion of this would have been paid Thursday, though the quantum could be smaller, dealers said. While money market rates rose compared to Wednesday, they were still at the lower end of the recent trading range due to surplus liquidity, dealers said. The central bank's net absorption from the banking system--a proxy for the liquidity surplus--was INR 1.72 trillion Wednesday, down a little from INR 1.75 trillion Tuesday.

 

Friday, liquidity could fall by around INR 700 billion to INR 1 trillion owing to GST payments, and traders were expecting the variable rate repo auction. However, the tenure and the small size of the auction surprised traders. They were expecting an overnight operation for around INR 1.00 trillion. The RBI last held a variable rate repo auction on Oct. 30.

 

"I was expecting a VRR of around one lakh (INR 1.00 trillion), so this is smaller and the tenure is big," a dealer at a state-owned bank said. "Maybe RBI might do the same thing that it did earlier; on Monday it can bring another fifty thousand (INR 500 billion) VRR. If the rates go out of control, the RBI might go for that."

 

Some traders were holding back on excess borrowing in the hope that the RBI's Monetary Policy Committee will cut the repo rate by 25 basis points early next month, but others do not expect a rate cut. So far this week, the RBI's defence of the rupee in the foreign exchange market has also been minimal, reducing hopes of any measures by the central bank to infuse durable liquidity in the banking system, dealers said. At an event in Delhi Thursday, RBI Governor Sanjay Malhotra said he was confident India and the US would reach a good trade deal, which could ease the pressure the rupee has come under.

 

Since the tri-party rate was largely above the RBI's standing deposit facility rate, the opportunity to capture the spread between the TREPS rate and the latter vanished, dealers said. However, some traders played on the arbitrage between the tri-party repo market and the Clearcorp Repo Order Matching System, dealers said. 

 

"There is arbitrage between TREPS and CROMS, if you are having access to both," a dealer at another state-owned bank said. "Otherwise there is little room for arbitrage if TREPS rises above SDF. Sometimes, the rate in CROMS is on the upper side so you can borrow from TREPS and lend in CROMS."

 

OUTLOOK

* On Friday, the three-day call money rate may near the RBI's repo rate as outflow for GST payments is expected to drain systemic liquidity, dealers said. However, due to the RBI's variable rate repo auction, rates may cool later in the day, dealers said.

* The RBI will conduct a seven-day variable rate repo auction of INR 500 billion at 0930-1000 IST Friday.

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

 

CALL RATE

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

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

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

 

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	THURSDAY	WEDNESDAY
Overnight	5.48	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 RBI's repo rate; weighted average rates up on GST outflows

 

MUMBAI – The one-day interbank call money rate was near the policy repo rate of 5.50% on the back of demand for funds due to goods and services tax payments, dealers said. They expect rates on Thursday to trade higher than on Wednesday  amid this demand and some also expect the Reserve Bank of India to conduct a variable rate repo auction Friday. 

 

At 1020 IST, the one-day call rate was at 5.40%, against Wednesday's close of 5.00%. The weighted average call rate was 5.49%, up from 5.38% Wednesday. The tri-party repo rate was at 5.28%, with a weighted average rate of 5.29%. On Wednesday, the weighted average rate of tri-party repo rate was 5.20%. Even by the end of the day, traders expect the weighted average rates to be 5-10 basis points higher than the previous day as even large banks – usually lenders in the money markets – may turn borrowers. 

 

"Sole purpose for this (rise in rates) is GST and there may be VRR after GST (payments)," a dealer from a private sector bank said. "If all GST payments are completed today (Thursday), then we may have VRR (Friday), (if GST payments are partly done then) liquidity may fall to 25,000 crores (INR 250 billion)." 

 

The central bank's net absorption from the banking system – a proxy for the liquidity surplus – was INR 1.72 trillion Wednesday, down from 1.75 trillion Tuesday. The marginal change in the liquidity surplus suggested that there were no large outflows for GST payments Wednesday as some traders had expected, dealers said. However, a nearly INR 180-billion reduction in banks' cash balances with the RBI suggested that some banks had made provisions for the outflows, they said.

 

"The GST outflows are going to be massive this time as it will take into account all the festival season spending," a dealer at a state-owned bank said. "Last month, we were expecting it to rise but that didn't happen, so this time it may be around INR 2 trillion."

 

However, dealers said that an assessment of whether the RBI needs to conduct a variable rate repo operation Friday would be taken later in the day when the market assesses the pace of GST payments being transacted Thursday. The central bank may only move into action if the call money rates shoot up to near 5.60% or the triparty repo rates approach 5.50%, they 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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