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Informist, Monday, Nov. 24, 2025

By Cassandra Carvalho

MUMBAI – The one-day interbank call money rate ended at the Reserve Bank of India's repo rate of 5.50% due to demand for funds amid outflows for goods and services tax payments, dealers said. Contrary to traders' expectations, the banking system liquidity was largely similar over the weekend, despite GST payments of at least INR 1.00 trillion expected in the same period. However, banks' cash balances maintained with the BRI fell. Some traders expect data for Monday to show a sharp outflow of at least INR 500 billion, while some said that most of the payments may have been made last week itself, dealers said. 

"Today (Monday) was normal only, there was nothing different," a dealer at a state-owned bank said. "GST outflows are ongoing, but there's not much of recognisable activity in money market. Volumes have increased but rates are just like it was on Friday." The volume in money markets rose to INR 6.87 trillion Monday from INR 6.49 trillion Friday. 

In total, the GST payments to the government will have a net drain of INR 1.40 trillion on banking system liquidity since Wednesday, dealers said. Traders also expect outflows from the systemic liquidity for the RBI's dollar sales in the spot market Friday and Monday, after the rupee slumped to a record low against the dollar Friday. Dealers in the foreign exchange market estimate that the RBI sold around $2 billion worth of dollars totally in the spot market Friday and Monday.  

"Since RBI had also come with a VRR on Friday, the outflows should've been more over the weekend," a dealer at a state-owned bank said. "Maybe some corporates have delayed, they have not filed their (GST) payments yet, Monday's liquidity figure will confirm what happened."

Expectations of the central bank conducting an overnight variable rate repo auction have faded for now, unless Monday's liquidity figure is sharply down from Sunday, dealers said. The redemption of INR 163.63 billion at the central bank's seven-day, INR-500-billion VRR auction held Friday was due Monday. 

The one-day call rate ended at 5.50%, up from Friday's close of 5.45% for three-day loans. The weighted average call rate was 5.52%, same as Friday. The weighted average rate in the wider tri-party repo market, which includes mutual funds, was 5.31%, down from 5.35% in the previous trading session. The central bank's net absorption from the banking system--a proxy for the liquidity surplus--was INR 1.51 trillion Sunday from INR 1.50 trillion Saturday and INR 1.49 trillion Friday. 

OUTLOOK

* On Tuesday, the one-day call money rate may open near the RBI's repo rate on early demand for funds due to outflows for GST payments.

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

CALL RATE

5.50%--Monday's close for one-day loans

5.60%--Monday's open for one-day loans

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

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Above repo on liquidity drain amid GST outflows, seen down

MUMBAI – The one-day interbank call money rate was above the Reserve Bank of India's repo rate due to early demand for funds amid a fall in banking system liquidity after goods and services tax payments, dealers said. The rates are expected to cool later in the day after banks' funding needs are met.

At 1045 IST, the one-day call rate was at 5.60%, against Friday's close of 5.45% for three-day loans. The weighted average call rate was also 5.60%, up from 5.52% Friday. The rate in the wider tri-party repo market was at 5.38%, with the weighted average rate at 5.35%.

"Rates are already higher and even volumes are up in call as some banks are also in borrowing side, not only PDs," a dealer at a private sector bank said.

"While there is liquidity drain, it is still at comfortable level. By end of the day (call and treps markets') rates are likely to fall by 10 bps (basis points). Currently, there are around 80,000 lenders (INR 800 billion being lent) and 20,000 borrowers (INR 200 billion being borrowed) in TREPS, which will eventually show on rates," a dealer at another private sector bank said.

Some traders said they expect the RBI to conduct an overnight or two-day variable rate repo operation to cool rates, while others said they were keen to borrow from the triparty repo market due to the cheaper cost of funds. Mutual funds' lending in the tri-party repo market is expected to keep the weighted average rate between 5.35% and 5.40%.

The central bank's net absorption from the banking system – a proxy for the liquidity surplus – was INR 1.49 trillion Friday, marginally lower than INR 1.57 trillion Thursday. Other than outflows from liquidity in the banking system, cash balances with the central bank as of Friday were also lower by almost INR 360 billion at INR 7.87 trillion. The average daily cash reserve requirement for the fortnight ending Friday is INR 8.07 trillion. Banks had maintained an excess early last week as a buffer against the scheduled outflows, which will allow them to maintain reserve requirements for the fornight, dealers said. 

Market participants await liquidity data for Saturday and Sunday for more cues. A dealer at a major state-owned bank expects the liquidity surplus to fall but remain in the range of INR 1.00 trillion to INR 1.15 trillion on Sunday. With no major outflows scheduled for the rest of the week beyond the INR 300-billion payment Monday for gilt auction, the RBI is unlikely to conduct a VRR operation. The government's month-end spending will add to the liquidity surplus later in the week, dealers said. (J. Navya Sruthi and Aaryan Khanna)

End

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

Edited by Vandana Hingorani

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