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Informist, Thursday, Dec. 4, 2025

By Aaryan Khanna

MUMBAI – The interbank call money rate ended near the Reserve Bank of India's repo rate of 5.50% Thursday ahead of the rate decision by the Monetary Policy Committee Friday. A few banks likely wanted to shore up their funding positions before the policy outcome, leading to a spurt of activity near the close, dealers said. Trade worth INR 9.50 billion were struck between 1823 IST and 1900 IST, the close of trade.

The one-day call rate ended at 5.45% against Wednesday's 4.95%. The weighted average call rate was 5.43%, up from 5.35% Wednesday. The weighted average rate in the wider triparty repo market, which includes mutual funds, was 5.25%, also up from 5.17% in the previous session.

The central bank's net absorption from the banking system--a proxy for liquidity surplus--was INR 2.56 trillion Wednesday, lower than INR 2.71 trillion Tuesday. Some of these funds were parked with the central bank since Monday at a four-day variable reverse rate auction at which it took all INR 569.35 billion offers.

A two-day VRRR worth INR 500.17 billion matured Thursday. Against that, the RBI had announced an overnight auction for a notified amount of INR 750 billion. It accepts all offers worth INR 723.77 billion at a cut-off and weighted average rate of 5.49%. 

"Banks have parked a hefty amount in the VRRR also since liquidity is in such a surplus," said a dealer at a private-sector bank. "You can see that TREPS is still offering below SDF (standing deposit facility) rates so banks were still looking there until 1600 IST."

OUTLOOK

On Friday, the three-day call money rate may open near the RBI's repo rate of 5.50% ahead of the variable rate reverse repo auction. Trades will likely be scant before RBI Governor Sanjay Malhotra outlines the Monetary Policy Committee's decision at 1000 IST, dealers said.

Borrowers would like to take advantage of lower rates if the MPC cuts the repo rate by 25 basis points to 5.25%. Traders look forward to the rate decision as well as comments on liquidity management from RBI officials for further cues. 

During the day, the one-day call money rate is seen in a range of 4.75-5.50%, dealers said. The RBI will Friday conduct a three-day VRRR auction for INR 1 trillion between 1200 IST and 1230 IST, against redemptions of two VRRRs worth nearly INR 1.3 trillion.

CALL RATE

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

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

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

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: At RBI's repo rate on demand for funds before overnight VRRR

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

"It is usually banks who lend in call and now, because of VRRR, call rates moved to repo. But during the day rates are expected to cool down because of ample liquidity (in the banking system)," a dealer at a private bank said.   

At 0933 IST, the one-day call rate was at 5.50%, up from Wednesday's close of 4.95%. Earlier on Thursday, the one-day call rate rose to a high of 5.55% on demand for funds. The weighted average call rate was 5.50%, also higher than 5.35% Wednesday. At the same time, the weighted average rate in the wider tri-party repo market, which includes mutual funds, was 5.27%, up from 5.17%.

The central bank's net absorption from the banking system – a proxy for liquidity surplus – was INR 2.56 trillion Wednesday, lower than INR 2.71 trillion Tuesday. "It (fall in liquidity surplus) is because of SDL (outflows for state bond auction). Today, we have T-bill auction outflows," a dealer at a state-owned bank said. 

On Tuesday, 13 states raised INR 297.25 billion at the RBI's bond auction and the payment by banks was completed on Wednesday. Thursday, banks will complete the payment of INR 190 billion for the T-bill auction. 

The RBI Thursday conducted an overnight VRRR auction, the third VRRR auction this week, 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 11 market participants. Dealers expect total offers at the auction to be between INR 350 billion and INR 750 billion, with a median estimate of INR 600 billion.

The central bank Monday conducted a four-day VRRR auction at which it took all INR 569.35 billion of offers, and another auction on Tuesday, a two-day VRRR, at which it took INR 500.17 billion of offers. It had set 5.49% as the cut-off at both the auctions.  (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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