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Informist, Friday, Nov. 28, 2025

By Cassandra Carvalho

MUMBAI – The three-day interbank call money rate Friday ended at the Reserve Bank of India's repo rate of 5.50%. Demand for funds was high across money markets as it was the last day of the fortnight, and banks had to maintain their cash reserve requirements, dealers said. As is usual the case on Friday, primary dealers were on the borrowing side to underwrite gilts at the weekly bond auction. Mutual funds were also not lending aggressively in the triparty repo market due to month-end redemption pressure.  

The three-day call rate ended at 5.50%, up from Thursday's close of 5.00% for one-day loans. The weighted average call rate was 5.56%, up from 5.40% Thursday. The weighted average rate in the wider triparty repo market, which includes mutual funds, was 5.41%, up from 5.30% in the previous trading session. The central bank's net absorption from the banking system – a proxy for liquidity surplus – was INR 1.27 trillion Thursday, up from INR 1.15 trillion Wednesday. Some traders said that a major tranche of the Centre's expenditure at the end of the month for salaries and pension payouts was yet to be made. Some of this has come into the banking system Friday, dealers said.

"I don't think there will be much demand for funds tomorrow (Saturday), some demand may be there from banks for month-end disbursements," a dealer at a private sector bank said. "...The liquidity will anyway improve because of CRR (cut) as well." 

However, the rise in money market rates is seen temporary, as around INR 650 billion of funds will be released into the banking system Saturday. The cash reserve ratio will be reduced by 25 basis points Saturday, to 3.00%. This is the fourth and final stage of the staggered cut in the cash reserve ratio that RBI Governor Sanjay Malhotra had announced at the June Monetary Policy Committee meeting outcome. This, coupled with the Centre's month-end expenditure, will keep liquidity in comfortable surplus due to lack of major outflows. The RBI post market hours announced a four-day variable rate reverse repo auction of INR 750 billion for Monday. Traders were expecting a VRRR, but the quantum was seen at INR 500 billion.

"Due to this month-end government spending, this VRRR has been announced. If you see, even after collection of DICGC premium, (liquidity has remained comfortable)," a dealer at a state-owned bank said. Banks likely made payments for their half-yearly deposit premiums to the Deposit Insurance and Credit Guarantee Corp. Thursday and Friday, dealers said.     

OUTLOOK

* On Saturday, the two-day call money rate may open below the RBI's repo rate due to around INR 650 billion of inflows from the release of funds from the last phase of the cut in the cash reserve ratio. Inflows from the government's month-end expenditure may also aid the systemic liquidity surplus. Volumes may be low, as is usual on Saturdays. 

* During the day, the two-day call money rate is seen in a range of 4.85-5.45%, dealers said.
* On Monday, the RBI will conduct a four-day variable rate reverse repo auction of INR 750 billion, 0930-1000 IST. 

CALL RATE

5.50%--Friday's close for three-day loans

5.50%--Friday's open for three-day loans

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

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Above repo rate on lack of govt spending, reporting Fri needs

NEW DELHI – The inter-bank call money rate was above the Reserve Bank of India's repo rate due to demand from banks to meet their liquidity requirements on the reporting Friday. Lack of government spending on Thursday and so far on Friday caught traders off guard as they had expected liquidity conditions to be easier by the end of the week, dealers said. 

At 0935 IST, the three-day call rate was at 5.60%, higher than Thurday's close of 5.00% for one-day loans. The weighted average call rate was 5.60%, against 5.40% Thursday. The weighted average rate in the wider tri-party repo market, which includes mutual funds, was 5.40%, slightly higher than 5.30% the previous day. 

"All the rates are higher on the reporting Friday as everyone is looking to create a buffer on cash," a dealer at a private sector bank said. "Mutual funds are also not on the lending side, so rates are higher in TREPS and call is unsecured so there is always a 10-20 basis (point) difference." Lending activity by mutual funds is lower because they were facing redemption pressure in liquid funds at the month-end, a seasonal phenomenon, dealers said. 

The central bank's net absorption from the banking system – a proxy for liquidity surplus – was INR 1.27 trillion Thursday, up from INR 1.15 trillion Wednesday. The surplus was effectively even lower as banks had lower cash balances with the RBI than the level to meet statutory norms, dealers said.

Cash parked with the central bank to meet statutory requirements was at INR 7.94 trillion Thursday, similar to Wednesday. Banks must keep an average of INR 8.06 trillion in cash with the RBI in the fortnight ending Friday, which they had maintained at around INR 8.10 trillion, but would endeavour to add to the balances on the reporting Friday, dealers said. A cut in the cash reserve ratio effective Saturday would free up around INR 650 billion and ease up liquidity, removing the need for short-term liquidity operations by the RBI, they said. 

"It is unlikely that RBI will conduct a VRR (variable rate repo) or VRRR (variable rate reverse repo)," a dealer at a state-owned bank said. "Current liquidity is at comfortable level and with last CRR tranche tomorrow, liquidity on Monday will also be comfortable." (Aaryan Khanna) 

End

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

Edited by Tanima Banerjee

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