More Stories

Informist, Wednesday, Dec. 17, 2025

By Kabir Sharma

NEW DELHI – The one-day interbank call money rate ended above the Reserve Bank of India's repo rate of 5.25% on Wednesday due to the liquidity crunch in the banking system after outflows for advance tax payments, dealers said. "Rates will remain around these levels until the pressure of GST outflows is over," a dealer at a state-owned bank said.

The RBI's net injection into the banking system – a proxy for the liquidity deficit – was INR 607.88 billion Tuesday, against absorption of INR 1.20 trillion on Monday. Dealers expect outflows of around INR 1.7 trillion for goods and services tax payments to begin Friday, which will further drain liquidity from the banking system.

The one-day call rate ended at 5.35%, down from 5.41% Tuesday. The weighted average call rate was 5.46%, higher than 5.41% the previous day. The weighted average rate in the broader tri-party repo market was 5.32%, unchanged from Tuesday but sharply up from 5.09% Monday. The tri-party repo rate closed at 5.45%.

The variable rate repo auction conducted earlier in the day was not fully subscribed despite the liquidity in the banking system falling into a deficit Tuesday. The RBI announced another VRR auction of INR 750 billion on Thursday to support system liquidity. The auction was expected by the market.

While banks may have fulfilled their borrowing requirements at the VRR auction, mutual funds cannot borrow from the auction. Mutual funds are facing year-end and quarter-end redemption pressures, and are also investing in initial public offerings, dealers said. Mutual funds, which are usually big lenders in the triparty repo market, are currently on the borrowing side as their funds are locked in initial public offerings, dealers said.

OUTLOOK

On Thursday, the one-day call money rate may open above the RBI's repo rate of 5.25% due to lower liquidity in the banking system. Dealers expect the VRR auction Thursday to infuse transient liquidity in the banking system. During the day, the one-day call money rate is seen moving in a range of 4.50-5.50%, dealers said.

CALL RATE

5.35%--Wednesday's close for one-day loans

5.55%--Wednesday's open for one-day loans

5.41%--Tuesday's close for one-day loans

BENCHMARK MIBOR (in %)

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: TREPS rate remains above repo even as VRR not fully subscribed

MUMBAI – Rates in the overnight tri-party repo market remained above the Reserve Bank of India's repo rate of 5.25% even after the central bank conducted its fourth variable rate repo auction for the week. The variable rate repo conducted earlier in the day was not fully subscribed despite the liquidity in the banking system falling to a deficit Tuesday. Dealers expect rates in both the tri-party repo market and call money market to remain above the repo rate for the rest of day, due to firm demand for funds for initial public offerings.    

At 1321 IST, the overnight tri-party repo rate was 5.34%, sharply higher from 5.25% at open, with its overnight weighted average rate at 5.34%. The overnight TREPS rate hit the day's high of 5.45%. At the same time, the one-day interbank call money rate was 5.25% after hitting a day's high of 5.65% Wednesday. The overnight weighted average call rate was 5.51%, against 5.41% Tuesday. The RBI's overnight VRR auction Wednesday infused INR 571.75 billion transient liquidity into the banking system.   

Most dealers were surprised that the overnight VRR auction Wednesday was not fully subscribed. "I was expecting it to be fully subscribed but there must be some counter party mismatch. Higher rates can also be because of more borrowers in the market," a dealer at a state-owned bank said.

While banks may have fulfilled their borrowing requirements at the VRR, mutual funds cannot borrow from this operation. Mutual funds are facing year-end and quarter-end redemption pressures, and are also investing in initial public offerings, dealers said. Mutual funds--which are usually the major lenders in the triparty repo market--are currently on the borrowing side, due to funds being locked up at initial public offerings, dealers said. The initial public offering of up to INR-106-billion of ICICI Prudential Asset Management Co. Ltd. was subscribed over 39 times as of the final day of the offer Tuesday, with qualified institutional buyers showing the strongest interest. ICICI Prudential Asset Management Co. is the largest asset management company in India in terms of active mutual fund quarterly average assets under management. 

Traders expect the central bank to conduct another VRR auction before Friday, when outflows of around INR 1.7 trillion for goods and services tax payments are likely to begin, which will further drain liquidity from the banking system. The RBI's net injection into the banking system – a proxy for liquidity deficit – was INR 607.88 billion Tuesday, against a net absorption of INR 1.20 trillion on Monday. (J. Navya Sruthi)

India Call: Above RBI's MSF rate on liquidity crunch, lack of VRR, seen up

MUMBAI – The one-day interbank call was above the Reserve Bank of India's marginal standing facility rate of 5.50% as liquidity in the banking system fell into deficit due to outflows for advance tax payments, dealers said. The RBI's net injection into the banking system – a proxy for the liquidity deficit – was INR 607.88 billion Tuesday, against absorption of INR 1.20 trillion on Monday.

At 0945 IST, the one-day call rate was 5.60%, sharply higher than Tuesday's close of 5.41%. The weighted average call rate was 5.55%, up from 5.41% Tuesday. So far Wednesday, the rate has shot up to 5.65%. The weighted average rate in the wider tri-party repo market, which includes mutual funds, was 5.36%, against 5.32% on Tuesday.

Dealers expect rates to remain above 5.35% for the day and those in tri-party repo market to trade around the repo rate for the day. They also expect outflows of INR 1.8 trillion to INR 2 trillion for goods and services tax payments, starting Saturday. 

Outflows during Monday and Tuesday for advance tax payments were around INR 1.5 trillion, according to the market. Lack of another variable rate repo auction also led to this sharp surge in rates in the call and tri-party repo market. However, at 0950 IST, the central bank announced another VRR auction for overnight, worth INR 750 billion which will be conducted between 1015 IST and 1045 IST Wednesday. This is the fourth VRR auction this week. 

So far, to infuse transient liquidity into the banking system, the RBI conducted three variable rate repo auctions on Monday and Tuesday. Although Monday's 11-day VRR auction saw poor subscription, bidding picked up in the two VRR auctions conducted Tuesday. A total of INR 1.52 trillion of transient liquidity has been injected into the banking system in the two days through VRRs. (J. Navya Sruthi) 

End

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

Edited by Ashish Shirke

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2025. All rights reserved.