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Informist, Thursday, Nov. 27, 2025

By Cassandra Carvalho

MUMBAI – The one-day interbank call money rate Thursday ended below the Reserve Bank of India's Standing Deposit Facility rate. As of 1930 IST, the RBI had not announced any liquidity management operation auction for Friday. Some traders were expecting a variable rate reverse repo auction to be announced, due to ample liquidity surplus aided by inflows from the central government's month-end expenditure, dealers said.

However, some traders said there might be upward pressure on overnight borrowing rates Friday since it is the reporting Friday of the fortnight. Banks are also expected to make payments for their half-yearly deposit premiums to the Deposit Insurance and Credit Guarantee Corp. Friday.  

Some traders expected a VRRR auction of INR 500 billion to be conducted Friday due to surplus liquidity. The RBI has not conducted a VRRR in nearly two weeks. The lack of such an auction this week has left traders wondering if the RBI is loosening its grip on holding the weighted average call rate close to repo. Most traders do not expect a VRRR next week, especially due to the RBI's Monetary Policy Committee meeting decision Dec. 5. Most traders expect the MPC to cut rates by 25 basis points next week. Some traders across money markets expect the central bank to announce a calendar of open market purchase of gilts through auction, to the tune of around INR 1.50 trillion, at the MPC meeting outcome next week. The move is seen offsetting the RBI's dollar sales in the foreign exchange market, along with bringing down bond yields, dealers said.

However, money market rates rose slightly Thursday, and are likely to rise further Friday due to fortnightly requirements, dealers said. Banks must maintain an average daily cash reserve requirement of INR 8.06 trillion for the fortnight ending Friday. Banks maintained INR 7.93 trillion Thursday.

Banks are likely to make payments for their half-yearly deposit premiums to the Deposit Insurance and Credit Guarantee Corp. Friday, the last working weekday of the month, dealers said. The Deposit Insurance and Credit Guarantee Corp. is an arm of the RBI and fully insures bank deposits of up to INR 500,000. The current premium rate is 10 paise per INR 100 of deposits per year, or 0.10%. As such, the half-year premium is 5 paise per INR 100 of deposits, or 0.05%. The premium for the first half of the financial year is to be paid by the last working day of November. Some of the outflows may return to the banking system next week as the institution is likely to purchase gilts with the funds collected, of which some of the purchases may be in the secondary market, dealers said. 

"It will have an impact, there will be an outflow of liquidity on account of this (deposit premium payments)," a dealer at a state-owned bank said. "I'm estimating around INR 35 to 40 thousand (INR 350 billion to INR 400 billion) tomorrow (Friday). It will collect all the premiums and some of it, it will be making purchases in the secondary (gilt) market with the idle cash."

The one-day call rate ended at 5.00%, down from Wednesday's close of 5.05% for one-day loans. The weighted average call rate was 5.40%, inching up from 5.39% Wednesday. The weighted average rate in the wider tri-party repo market, which includes mutual funds, was 5.30%, up from 5.26% in the previous trading session. The central bank's net absorption from the banking system – a proxy for the liquidity surplus – was INR 1.15 trillion on Wednesday, lower than INR 1.34 trillion Tuesday. 

OUTLOOK

* On Friday, the three-day call money rate may open near the RBI's repo rate due to forynightly reporting Friday requirements and likely payments to Deposit Insurance and Credit Guarantee Corp.

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

CALL RATE

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

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

5.05%--Wednesday'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; liquidity surplus falls

MUMBAI – The inter-bank call money rate was near the Reserve Bank of India's repo rate due to demand in early trade, likely from primary dealerships. However, banks' demand for funds may ease in the rest of the day amid lack of scheduled outflows and expectations of the government's month-end spending bolstering liquidity, dealers said. Traders expect rates to trend similar to Wednesday.

At 1020 IST, the one-day call rate was at 5.45%, higher than Wednesday's close of 5.05%. The weighted average call rate was 5.45%, against 5.39% Tuesday. The weighted average rate in the wider tri-party repo market, which includes mutual funds, was 5.29%, slightly higher than 5.26% the previous day. 

"There are some loan disbursements because of which rates are likely to rise during the end. But rates will remain around repo as no major outflows are seen today (Thursday)," a dealer at a state-owned bank said. Dealers see call rates at 5.40-5.45% and tri-party market rates at 5.20-5.35% for the day.

"Although TREPS market rates are higher currently, it is expected to fall during the day. There are 1-2 major PSUs (public sector undertaking) banks seen on borrowing side," a dealer at a private sector bank said. Mutual funds are seen lending in tri-party repo market, the dealer said.  

The central bank's net absorption from the banking system – a proxy for the liquidity surplus – was INR 1.15 trillion on Wednesday, lower than INR 1.34 trillion Tuesday. At Tuesday's RBI state bond auction, 14 states raised INR 250.67 billion. The payments for this auction were settled Wednesday and drained liquidity, dealers said.

Banks also drew drown their cash balances with the RBI to better manage the outflows. Cash parked with the central bank to meet statutory requirements fell to INR 7.93 trillion Wednesday from INR 8.00 trillion Tuesday. Banks must keep an average of INR 8.06 trillion in cash with the RBI in the fortnight ending Friday before a cut in the cash reserve ratio frees up around INR 650 billion.

Dealers expect the RBI to conduct a three-day variable rate reverse repo operation Friday on surplus liquidity in the banking system. Although liquidity was lower Wednesday, dealers expect the government's month-end spending and the last tranche of the cash reserve ratio cut Saturday to add to the current liquidity surplus.  End

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

Edited by Vandana Hingorani

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