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Informist, Tuesday, Dec. 2, 2025

By Aaryan Khanna

NEW DELHI – The one-day interbank call money rate Tuesday ended well below the Standing Deposit Facility rate of 5.25% due to a rise in the banking system liquidity surplus to its highest in nearly three months, dealers said. Lack of scheduled outflows kept banks' cash needs limited and rates were below the policy repo rate for most of the day even with the Reserve Bank of India conducting an INR 500 billion variable rate reverse repo operation.

The one-day call rate ended at 4.95%, the same as Monday's close. The weighted average call rate was 5.34%, down from 5.42% Monday. The weighted average rate in the wider triparty repo market, which includes mutual funds, was 5.18%, slightly lower than 5.20% in the previous session.

The central bank's net absorption from the banking system--a proxy for liquidity surplus--was INR 2.59 trillion Monday, higher than INR 1.45 trillion Sunday. Monday's liquidity surplus in the system was the highest since Sept. 14, when liquidity was INR 2.66 trillion. The liquidity boom came as banks drew down their cash balances with the RBI after the weekend and parked them in the Standing Deposit Facility, dealers said. Some inflows from the government's routine spending at the beginning of the month also added to banking system liquidity.

The last tranche of the cash reserve ratio cut effective Saturday brought down banks' regulatory needs for cash by around INR 660 billion from the previous fortnight. Banks have to maintain an average holding of INR 7.40 trillion for cash reserve ratio in the fortnight ending Dec. 12. They held INR 7.45 trillion as cash with the RBI Monday, sharply down from INR 8.32 trillion as of Sunday. 

The hefty liquidity surplus led to banks offering INR 559.44 billion at the two-day, INR 500 billion VRRR auction announced and conducted Tuesday. The central bank accepted offers worth INR 500.17 billion. Banks have already parked INR 569.35 billion with the RBI in a four-day VRRR auction Monday. 

OUTLOOK

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

During the day, the one-day call money rate is seen in a range of 4.85-5.50%, dealers said. With over INR 1 trillion of liuqidity already locked up in variable rate reverse repos, traders do not expect any further liquidity operations by the RBI until Thursday.

CALL RATE

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

5.40%--Tuesday's open for one-day loans

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

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Below RBI's repo rate on lack of outflows amid ample liquidity

MUMBAI – The inter-bank call money rate was below the Reserve Bank of India's repo rate Tuesday due to lack of outflows amid ample liquidity in the banking system. With the RBI's sudden announcement of a two-day variable rate reverse repo auction, some dealers expect call money rate to rise slightly. However, during the day, rates are expected to fall on low demand for funds.  

At 1006 IST, the one-day call rate was at 5.35%, up from Monday's close of 4.95%. The weighted average call rate was 5.40%, down from 5.42% Monday. At the same time, the weighted average rate in the wider tri-party repo market, which includes mutual funds, was 5.20%, same as the previous close.

"Government's spending and CRR cut added to liquidity. It is expected to remain at same level for (this) week," a dealer at a state-owned bank said. The dealer expects the call money rate to trade around 5.35-5.40% for the day and the tri-party repo rate around 5.20%.      

The central bank's net absorption from the banking system – a proxy for liquidity surplus – was INR 2.59 trillion Monday, higher than INR 1.45 trillion Sunday. Monday's liquidity surplus in the system was the highest since Sept. 14, when liquidity was INR 2.66 trillion. The last tranche of CRR cut added around INR 650 billion to the banking system.  

The central bank will hold a two-day VRRR auction for INR 500 billion between 1030 IST and 1100 IST Tuesday. Reversal of the tender will take place Thursday. The central bank is likely to set a cut-off of 5.49% at this auction, according to the median in a poll of nine market participants by Informist. Dealers expect total offers at the auction to be between INR 275 billion and INR 500 billion, with a median estimate of INR 500 billion.

"RBI may come up with another VRRR of INR 50,000 crores (500 billion) because of surplus liquidity (in the banking system)," a dealer at a private sector bank said. "RBI doesn't want weighted average rate (for call) to fall below 5.30% and for it to remain around repo, we need one more VRRR," the dealer said. "Before the VRRR auction, we can expect call money rate to rise to 5.49%, which is usually cut-off for a VRRR auction," the dealer said. 

The RBI Monday conducted a four-day VRRR auction for a notified amount of INR 750 billion. It had set 5.49% as the cut-off and taken all INR 569.35 billion of offers at the auction. (J. Navya Sruthi)  End

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

Edited by Akul Nishant Akhoury

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