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Informist, Friday, Dec. 12, 2025

By Aaryan Khanna

MUMBAI – The interbank call money rate ended near the Reserve Bank of India's repo rate of 5.25% due to demand for funds from banks on reporting Friday, dealers said. Banks were able to meet their demand at or below the repo rate due to ample surplus liquidity, including the addition of INR 500 billion Friday from the RBI's open market operation auction to buy bonds Thursday.

The three-day call rate ended at 5.20% against the 4.80% close for one-day loans Thursday. The weighted average call rate was 5.18%, against 5.20% the previous day. The weighted average rate in the wider tri-party repo market has fallen 5 basis points each over the last two days and was at 5.01% Friday. Trade volumes fell below INR 200 billion for the first time in five sessions Friday.

The central bank's net absorption from the banking system – a proxy for the liquidity surplus – was INR 1.84 trillion Thursday, slightly higher than INR 1.66 trillion Wednesday due to a fall in cash balances with the RBI. The OMO auction had not reflected in this figure yet but led to a reduction in bank's borrowing needs Friday as the cash was credited to them by the RBI, dealers said.

"The expectation was there that the RBI is going to support and the OMO auction has already helped in that sense, the liquidity has come in today (Friday)," a dealer at a state-owned bank said. "Other than the reporting Friday needs, no outflows have started today (Friday). The pressure will come in from Monday with advance tax."

As of Thursday, cash balances of banks with the RBI were INR 7.13 trillion, down from INR 7.25 trillion Wednesday and against the requirement of INR 7.40 trillion for the fortnight ending Friday. Banks said they had leeway on maintaining the regulatory holdings after keeping an excess at the beginning of the fortnight, which also mitigated their liquidity needs on the reporting Friday, dealers said. 

Still, traders continued to expect the RBI to conduct variable rate repo auctions to keep rates in check amid large outflows scheduled over the next 10 days. Advance tax outflows on Monday and Tuesday will drain around INR 1.5 trillion of liquidity from the banking system, with goods and services tax payments after Dec. 20 to allow a drain of over INR 1.5 trillion from banking system liquidity to the government's coffers. 

OUTLOOK

The call market is shut Saturday. On Monday, the one-day call money rate may open near the RBI's repo rate of 5.25% on early demand for funds. Outflows for advance tax are expected to drain liquidity starting Monday, dealers said. During the day, the one-day call money rate is seen in a range of 4.50-5.30%, dealers said.

The outflows will be offset in part by the RBI's bond buys through OMO auctions to buy bond, which will add INR 1 trillion of liquidity between Friday and Dec. 19, dealers said. In addition, the central bank has announced an 11-day VRR auction on Monday and a 10-day VRR auction on Tuesday of INR 750 billion each, which will keep money market rates in check amid the outflows, they said. The maturity of the auctions will be after goods and services tax outflows are also calculated, creating a liquidity buffer for market participants that may reduce friction amid the outflows, dealers said. 

CALL RATE

5.20%--Friday's close for three-day loans

5.25%--Friday's open for three-day loans

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

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: At RBI's SDF rate on comfortable liquidity surplus

MUMBAI – The one-day interbank call money rate was at the Reserve Bank of India's standing deposit facility rate of 5.00% Friday due to a comfortable liquidity surplus in the banking system. Bond purchases by the RBI through the OMO auction Thursday will also infuse liquidity into the banking system Friday. 

At 1015 IST, the one-day call rate was at 5.00%, up from Thursday's close of 4.80%. The weighted average call rate was 5.25%, up from 5.20% Thursday. The weighted average rate in the wider tri-party repo market, which includes mutual funds, was 5.07%, a tad higher than 5.06% Thursday.

Dealers see rates at the lower end of the liquidity adjustment facility corridor due to ample liquidity surplus in the banking system. The central bank's net absorption from the banking system – a proxy for the liquidity surplus – was INR 1.84 trillion Thursday, slightly higher than INR 1.66 trillion Wednesday due to a fall in cash balances with RBI. 

As of Thursday, cash balances of banks with the RBI were INR 7.13 trillion, down from INR 7.25 trillion Wednesday and against the requirement of INR 7.40 trillion for the fortnight ending Friday. The RBI infused durable liquidity of INR 500 billion through open market operations auction Thursday, which will be reflected in Friday's liquidity.  

"I was expecting rates to open higher because of reporting Friday and change in CRR norms," a dealer at a state-owned bank said. "But rates will be lower now because of OMO and low borrowers in (the) market (call and tri-party repo markets)," the dealer said.  

The RBI Thursday issued a fresh set of amendments, revising the norms for maintaining and reporting the Cash Reserve Ratio and Statutory Liquidity Ratio for urban co-operative banks, which will be effective from Monday. It has changed the definition of "fortnight" from a Saturday-to-Friday cycle to a clearly defined two-part monthly period – either the 1st to the 15th of each month, or the 16th to the last day of the month, both days inclusive.  

The central bank also asked banks to maintain 100% of the required cash reserve ratio during the transition period, Saturday to Monday. During this time, they will have to maintain their cash reserve ratio and statutory liquidity ratio based on the net demand and time liabilities as of Nov. 28. The dealer said that the NDTL for Nov. 28 will be higher than INR 240.9 trillion seen on Nov. 14, which is usually the case for the last Friday of every month.  

Dealers expect a total of INR 2.5 trillion to INR 3.0 trillion of outflows for payments for goods and services and advance tax starting next week. They expect a variable rate repo auction next week with scheduled outflows for tax payments.  (J. Navya Sruthi) 

End

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

Edited by Tanima Banerjee

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