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Informist, Thursday, Dec. 11, 2025

By Kabir Sharma

MUMBAI – The interbank call money rate ended below the Reserve Bank of India's Standing Deposit Facility rate of 5.00% on Thursday as demand for funds from banks was limited amid a comfortable liquidity surplus. Market participants also looked forward to the infusion of INR 500 billion into the banking system on Friday after the RBI's open market purchases of government bonds sailed smoothly at the auction.

The one-day call rate ended at 4.80%, below the closing level of 5.20% the previous two days. The weighted average call rate was 5.20%, same as the previous day. The weighted average rate in the wider tri-party repo market, which includes mutual funds, was 5.06%, 5 basis points lower than Wednesday. Trade volumes topped INR 200 billion for the fourth straight session on Thursday.

"As of now we are comfortable, advance tax outflows are expected to start on the weekend, until then there are no major outflows," a dealer at a state-owned bank said. The RBI bought seven gilts worth INR 500 billion, the entire notified amount, at the auction.

The central bank's net absorption from the banking system--a proxy for the liquidity surplus--was INR 1.66 trillion Wednesday, slightly lower than INR 1.85 trillion Tuesday as banks increased cash balances with RBI before the reporting Friday. As of Wednesday, cash balances of banks with the RBI were INR 7.25 trillion, up from INR 7.12 trillion Tuesday and against the requirement of INR 7.40 trillion for the fortnight ending Friday.

Payments to the government for advance tax mid-month are likely to keep demand for funds from banks high in the coming days, dealers said. The RBI may also announce a short-term variable rate repo auction of around INR 500 billion on Friday to keep rates near the policy repo rate of 5.25%.

The RBI has also announced a liquidity infusion through a three-year, $5 billion dollar-rupee buy-sell swap auction next week, which will settle on Dec. 18 and add about INR 450 billion of durable liquidity. Advance tax payments and goods and services tax payments are expected to drain over INR 2.5 trillion of banking system liquidity between Dec. 15 and Dec. 22, dealers said.

OUTLOOK

On Friday, the three-day call money rate may open near the RBI's repo rate of 5.25% on early demand for funds. The first tranche of the RBI's open market operation to buy bonds via auction held Thursday will infuse INR 500 billion of liquidity Friday. During the day, the one-day call money rate is seen in a range of 4.50-5.25%, dealers said.

The central bank may conduct a VRR auction Friday or early next week, due to liquidity requirements of banks amid advance tax outflows of around INR 1.5 trillion starting over the weekend.

CALL RATE

4.80%--Thursday's close for one-day loans

5.25%--Thursday's open for one-day loans

5.20%--Wednesday's close for one-day loans

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: At repo rate on early demand for funds; mkt eyes RBI's OMO

MUMBAI – The one-day interbank call money rate was at the Reserve Bank of India's repo rate of 5.25% Thursday due to early demand for funds from primary dealerships, dealers said. They expect rates to trade in a range of 5.15-5.25% due to comfortable liquidity in the banking system. 

At 0947 IST, the one-day call rate was at 5.25%, up from Wednesday's close of 5.20%. The weighted average call rate was 5.25%, up from 5.20% Wednesday. The weighted average rate in the wider tri-party repo market, which includes mutual funds, was 5.11%, the same as on Wednesday.

The central bank's net absorption from the banking system--a proxy for the liquidity surplus--was INR 1.66 trillion Wednesday, slightly lower than INR 1.85 trillion Tuesday as banks increased cash balances with RBI before the reporting Friday. As of Wednesday, cash balances of banks with the RBI were INR 7.25 trillion, up from INR 7.12 trillion Tuesday and against the requirement of INR 7.40 trillion for the fortnight ending Friday.

The market awaits the RBI's open market operations for more cues on liquidity in the banking system. On Thursday, the RBI is conducting government bond purchases worth INR 500 billion through an open market operations auction, which will be settled Friday. 
 

"Most PSUs (public sector undertaking banks) are not happy with the bonds RBI has offered. It is likely to be a weak auction but if any bank has all these bonds then the amount may be fully subscribed," a dealer at a state-owned bank said. 

Dealers also expect a variable rate repo auction next week with scheduled outflows for advance tax payments and goods and services tax payments. "If OMO is weak, then we can expect one before Friday, but we may have one next week as liquidity may go into deficit with these (GST and advance tax payments)" the dealer said. Dealers expect a total of INR 2.5 trillion to INR 3.0 trillion outflows for the GST and advance tax payments. (J. Navya Sruthi)

End

US$1 = INR 90.37

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

Edited by Ashish Shirke

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