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Informist, Monday, Dec. 1, 2025

By Aaryan Khanna

NEW DELHI – The one-day interbank call money rate Monday ended below the Reserve Bank of India's Standing Deposit Facility rate of 5.25% due to lack of demand for funds from banks amid comfortable liquidity conditions. The four-day variable rate reverse repo auction drew modest demand and did not put an upward pressure on rates except for early in the day, dealers said.

The one-day call rate ended at 4.95%, the same as Saturday's close for two-day loans. The weighted average call rate was 5.42%, up from 5.25% Saturday but down from 5.56% Friday. The weighted average rate in the wider triparty repo market, which includes mutual funds, was 5.20%, down from 5.41% on Friday though it rose from Saturday's 4.90%. Trade volume in the money market is typically low on Saturdays as most financial institutions meet their cash needs for the weekend on Friday.

The central bank's net absorption from the banking system – a proxy for liquidity surplus – fell to INR 1.45 trillion on Saturday and Sunday from INR 1.75 trillion Friday. This was despite the last tranche of the cash reserve ratio cut effective Saturday allowing banks to reduce their cash balances with the RBI by around INR 660 billion from the previous fortnight.

Banks maximised the cash parked with the RBI for statutory requirements over the weekend anticipating they would have to draw down cash balances later at the end of the fortnight ahead of advance tax payments, dealers said. They added INR 477 billion to these balances, which don't show in the RBI's liquidity absorbed, over the weekend. Netting the excess out, banks had a surplus of around INR 2.37 trillion from about INR 1.52 trillion on Friday, when the cash balances were below regulatory requirements. Banks have to maintain an average holding of INR 7.40 trillion this fortnight and were holding INR 8.32 trillion as of Sunday.

"This surplus is not even counting more government spending that is going to come in till Tuesday or Wednesday," a dealer at a private-sector bank said. "So right now the system is flush with liquidity. The reason why VRRR participation was not good was because of tenure."

The RBI accepted all offers worth INR 569.35 billion at the four-day, INR 750-billion auction Monday. Banks prefer to park funds in overnight operations to make the most flexible decisions on their cash management, which is why the auction was not fully subscribed, dealers said.

OUTLOOK

On Tuesday, the one-day call money rate may open below the RBI's repo rate due to surplus liquidity in the banking system. Inflows from the government's routine expenditure may also add to the liquidity surplus in the coming days.

During the day, the one-day call money rate is seen in a range of 4.85-5.50%, dealers said. Some traders expect the RBI to announce an overnight VRRR auction this week to prevent the weighted average call rates falling to near 5.25%, the SDF rate.

CALL RATE

4.95%--Monday's close for one-day loans

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

4.95%--Saturday's close for two-day loans

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: At RBI's repo on 4-day VRRR, seen down on comfortable liquidity

MUMBAI – The inter-bank call money rate was at the Reserve Bank of India's repo rate Monday on early demand for funds and because of the central bank's four-day variable rate reverse repo auction, dealers said. During the day, dealers expect the call rate to fall due to comfortable liquidity in the banking system. 

At 1004 IST, the one-day call rate was at 5.50%, up from the two-day call rate of 4.95% Saturday. The weighted average call rate was 5.50%, up from 5.25% Saturday. At the same time, the weighted average rate in the wider tri-party repo market, which includes mutual funds, was 5.30%, also higher than 4.90% Saturday.  

"Call rate will trade at 5.40-5.50% for today (Monday) as there are no major-scheduled outflows or inflows for the day. Liquidity over the weekend may rise to 2 lakh crore (INR 2 trillion), which is comfortable," a dealer at a state-owned bank said. Data for the liquidity over the weekend will be available later in the day.

The central bank's net absorption from the banking system – a proxy for liquidity surplus – was INR 1.75 trillion Friday, higher than INR 1.27 trillion Thursday. The last of the four 25-basis-point cuts in the cash reserve ratio took effect Saturday, and is expected to boost liquidity in the system to INR 2.0 trillion or higher, dealers said. The last tranche of CRR cut is expected to add between INR 550 billion and INR 600 billion into the banking system, dealers said. 

"I don't see rates going beyond 5.60% or to that level during the day as there are no outflows other than Friday's glits auction," a dealer at another state-owned bank said. "Initially, it (call rate) is expected to rise to 5.60% because of VRRR," the dealer said. Banks will pay INR 320 billion for the gilts RBI auctioned Friday.  

The RBI Monday conducted a four-day VRRR auction for a notified amount of INR 750 billion. The central bank is likely to set a cut-off of 5.49% at this auction, according to the median in an Informist poll of eight market participants. Dealers expect total offers at the auction to be between INR 250 billion and INR 750 billion, with a median estimate of INR 525 billion.  (J. Navya Sruthi)  End

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

Edited by Ashish Shirke

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