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Informist, Wednesday, Nov. 26, 2025

By Cassandra Carvalho

MUMBAI – The one-day interbank call money rate Wednesday ended below the Reserve Bank of India's Standing Deposit Facility rate, due to inflows from government expenditure and lack of major outflows, dealers said. However, there was a slight upward pressure on rates in the triparty repo market since mutual funds, which are usually the major lenders in the triparty repo market, were likely using funds to purchase gilts and Treasury bills, dealers said.

Liquidity in the banking system is comfortable due to the central government's month-end expenditure for salaries and pensions, along with welfare schemes, dealers said. However, rates in the triparty repo market rose slightly in the middle of the session likely because mutual funds refrained from lending aggressively, dealers said. Mutual funds are facing month-end redemption pressures. Moreover, they were likely investing in government bonds and Treasury bills instead of lending funds in TREPS, dealers said. The cut-off yields at the INR 190-billion Treasury bill auction were lower than expectations, on bets of a rate cut by the RBI's Monetary Policy Committee next week, dealers in the gilt market said. The INR 60-billion supply each of the 182-day and 364-day T-bills was grabbed in five bids and nine bids, respectively, likely by a large investor such as a mutual fund, they said.

"TREPS was on the lower side in the morning but if you see in the afternoon between 1230 (pm) to 2 pm, it was slightly on the higher side, but it came down gradually," a dealer at a state-owned bank said. "I think it's the mutual fund factor, because there was no other clue in the market. T-bill cut-offs also came on the softer side, so that factor can only be there."

Inflows into the banking system due to government expenditure for welfare schemes likely offset outflows of around INR 130 billion Tuesday for settlement of the RBI's spot dollar sales in the foreign market Friday to support the rupee, dealers said. A similar quantum of outflow is expected Wednesday. Most dealers expect a three-day variable rate reverse repo auction Friday for INR 500 billion, due to the comfortable liquidity. Some traders do not expect an auction due to fortnightly reporting requirements for Friday, and likely RBI intervention in the foreign exchange market, which drains rupee liquidity.

Those who expect a VRRR auction said the Centre's month-end expenditure would add to the surplus liquidity in the banking system, ahead of the final tranche of inflows from the RBI's four-stage cut in the cash reserve ratio Saturday. The cash reserve ratio will be cut to 3.00% Saturday, from 3.25% currently, and is expected to release funds worth around INR 500 billion.

"We believe the last tranche of the CRR cut will bring in 44 thousand crore (INR 440 billion) by November end, this much excess liquidity will be pumped in, and we'll see some OMOs also happening," a dealer at another state-owned bank said. "We expect 2 to 3 lakh crore (INR 2.00 trillion to INR 3.00 trillion) of OMOs up till January."

Some traders across money markets expect the central bank to announce a calendar of open market purchase of gilts through auction at the MPC's decision outcome next week, to the tune of around INR 1.50 trillion. The move is seen offsetting the RBI's dollar sales in the foreign exchange market, along with bringing down bond yields, dealers said.

The one-day call rate ended at 5.05%, down from Tuesday's close of 5.44% for one-day loans. The weighted average call rate was 5.39%, down from 5.43% Tuesday. The weighted average rate in the wider tri-party repo market, which includes mutual funds, was 5.26%, up from 5.25% in the previous trading session. The central bank's net absorption from the banking system – a proxy for the liquidity surplus – was INR 1.34 trillion on Tuesday, slightly higher than INR 1.28 trillion Monday.

OUTLOOK

* On Thursday, the one-day call money rate may open below the RBI's repo rate due to lack of major outflows amid comfortable liquidity.

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

CALL RATE

5.05%--Wednesday's close for one-day loans

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

5.44%--Tuesday's close for one-day loans

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Near repo rate on early demand; traders see liquidity as ample

MUMBAI – The inter-bank call money rate was near the Reserve Bank of India's repo rate amid early demand for funds, but is expected to fall due to the liquidity surplus in the banking system and lack of scheduled outflows, dealers said. Traders expect the RBI to announce a three-day variable rate reverse repo operation Friday as the liquidity surplus climbs following the government's month-end spending for salaries and pensions.  

At 1025 IST, the one-day call rate was at 5.45%, similar to Tuesday's close of 5.44%. The weighted average call rate was 5.45%, against 5.43% Tuesday. The weighted average rate in the wider tri-party repo market, which includes mutual funds, was 5.24%, similar to 5.25% the previous day. Dealers expect rates in both call and tri-party repo markets to trade similar to Tuesday on low demand for funds from banks.  

"Currently, volumes are quite low as there are no borrowers. Most participants are waiting for rates to fall during day. Around 1100-1200 (IST) we can expect volumes to increase," a dealer at a state-owned bank said. Dealers said mutual funds are on the lending side in the tri-party repo market, while banks and primary dealerships are on the borrowing side.

The central bank's net absorption from the banking system – a proxy for the liquidity surplus – was INR 1.34 trillion on Tuesday, slightly higher than INR 1.28 trillion Monday. Neither the current level of surplus liquidity nor rates is seen prompting an RBI liquidity operation until Friday, dealers said. 

Dealers said the government's month-end spending and the last tranche of the cash reserve ratio cut Saturday are likely to add up to INR 2 trillion to the banking system. The last tranche of the cash reserve ratio cut for banks will alone free up around INR 650 billion for banks to park in the standing liquidity facility window. 

Dealers expect the RBI to announce a three-day VRRR Friday on the maturity of a variable rate repo operation on the same day. At last week's seven-day VRR, the RBI had received all INR 163.63 billion bids, against the notified amount of INR 500 billion. (J. Navya Sruthi and Aaryan Khanna)

End

US$1 = INR 89.27

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

Edited by Ashish Shirke

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