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Informist, Friday, Nov. 21, 2025

 

By Aaryan Khanna

 

NEW DELHI – The three-day interbank call money rate ended near the Reserve Bank of India's repo rate of 5.50% due to firm demand for funds through the day amid goods and services tax-related outflows of around INR 500 billion, dealers said. Rates cooled slightly after the RBI's variable rate repo auction but were still around the repo rate due to the poor demand at the variable rate repo auction.

 

The RBI conducted its first seven-day liquidity operation since rolling out its revised liquidity management framework on Sept. 30, which counts these operations as the primary tool to manage frictional liquidity. Banks and primary dealerships bid for only INR 163.63 billion at the seven-day INR 500-billion auction. The RBI accepted all bids at a cut-off rate and weighted average rate of 5.51%.

 

"TREPS (triparty repo rates) are going as low as 5.25% and even call should correct to below the repo by early next week assuming government spending may come in quickly," a dealer at a state-owned bank said. "Nobody wants to lock in their borrowing above the repo (rate) for a whole week, if it was until Monday, may be the demand would have been better." The central bank is expected to conduct VRR auctions of shorter tenures early next week if call money rates trend towards the Marginal Standing Facility rate of 5.75%, dealers said.

 

The three-day call rate ended at 5.45%, up from Thursday's close of 5.40% for one-day loans. The weighted average call rate was 5.52%, against 5.41% Thursday. The weighted average rate in the wider tri-party repo market, which includes mutual funds, was 5.35%, also up from 5.27% in the previous trading session.

 

The central bank's net absorption from the banking system--a proxy for the liquidity surplus--was INR 1.57 trillion Thursday, marginally down from INR 1.72 trillion Wednesday. This is likely to fall to close to INR 1 trillion for Friday's data, dealers said. In total, the GST payments to the government will have a net drain of INR 1.40 trillion on banking system liquidity since Wednesday, they said.

 

OUTLOOK

* Money market are shut Saturday. On Monday, the one-day call money rate may open near the RBI's repo rate on early demand for funds as the liquidity surplus declines due to outflows for GST payments.

* Some traders expect the RBI to conduct short-term fine-tuning liquidity injections after the seven-day VRR auction Friday was poorly bid against the INR 500-billion notified amount.

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

 

CALL RATE

5.45%--Friday's close for three-day loans

5.60%--Friday's open for three-day loans

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

 

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	FRIDAY	THURSDAY
Overnight	5.59	5.48
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: Above repo as nearly INR 500 bln outflows for GST expected Fri

 

MUMBAI – The three-day interbank call money rate was above the Reserve Bank of India's repo rate as a major chunk of payments for goods and services tax is expected Friday, dealers said. Around INR 500 billion worth of outflows are likely Friday, though the figure could be higher, dealers said. The RBI's INR-500-billion seven-day variable rate repo auction was welcomed by traders, but the subscription was seen at only around 50% of the total notified amount, as per an Informist poll, since rates in the triparty repo market were lower.

 

At 1000 IST, the three-day call rate was at 5.60%, against Thursday's close of 5.40% for one-day loans. The weighted average call rate was also 5.60%, up from 5.41% Thursday. The rate in the wider tri-party repo market, which includes mutual funds, was at 5.41%, with the same weighted average rate. On Thursday, the weighted average tri-party repo rate was 5.27%. The triparty repo rate is expected to hover near the repo rate, while the call money rate is likely to trade above repo for most of the day, dealers said. 

 

Over a span of four to five days, outflows of around INR 1.70 trillion are expected for goods and services tax payments, which started Wednesday, though the net drain on liquidity is seen to be around INR 1.40 trillion due to redemptions and other inflows, dealers said. Of this figure, around INR 200 billion was paid Thursday and INR 500 billion is expected to be paid Friday, dealers said.

 

"Net effect of GST payments will be around 50,000-60,000 crores (INR 500 billion to INR 600 billion). Already some amount was out from the system," a dealer at a private sector bank said. 
 

Some traders expressed disappointment over the RBI's variable rate repo auction. "I don't know why RBI has come up with 7-day VRR auction. It is a very long tenure, and unless a bank is in need of money we will not see full subscription," a dealer at a state-owned bank had said during the auction. Most dealers do not expect the VRR auction to be fully subscribed, nor do they see another VRR auction amid comfortable liquidity in the system. Some traders expect an overnight VRR to be held for INR 500 billion Monday, depending on the movement of rates on Friday. The central bank's net absorption from the banking system--a proxy for the liquidity surplus--was INR 1.57 trillion Thursday, marginally down from INR 1.72 trillion Wednesday.

 

The squeeze in liquidity is seen as temporary, as the Centre's month-end expenditure is expected next week, along with around INR 700 billion worth of inflows from the final tranche of the cash reserve ratio cut in the fortnight beginning Nov. 29, dealers said.  (J. Navya Sruthi and Cassandra Carvalho)

End

 

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

 

Edited by Akul Nishant Akhoury

 

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