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Informist, Monday, Dec. 22, 2025

By Aaryan Khanna

NEW DELHI – The interbank call money rate ended near the Reserve Bank of India's marginal standing facility of 5.50% on firm demand for funds amid outflows on account of goods and services tax payments to the government. Banking system liquidity remained in deficit, which may widen by about INR 1 trillion Monday after the outflows, dealers said.

The one-day call rate ended at 5.46%, against 4.75% for two-day loans Saturday and 5.00% for three-day loans Friday. The weighted average call rate was above the repo rate at 5.38%, similar to 5.37% Friday and higher than 4.77% on Saturday, when trade volumes were low.

The RBI's net liquidity injected into the banking system--a proxy for the liquidity deficit--was INR 577.21 billion Sunday, similar to INR 570.18 billion Saturday and higher than INR 374.10 billion Friday. Although there were inflows of INR 500 billion from the central bank's bond purchases at the open market operation auction held Thursday, the liquidity deficit widened over the weekend as there were some outflows for GST payments as well as the settlement of the RBI's dollar sales on Friday.

"A big reason for the liquidity going down is that RBI sold dollar very heavily to bring the rupee back to 89 (a dollar)," a dealer at a state-owned bank said. The domestic unit had fallen to a record low of 91.08 a dollar before recovering due to the central bank's intervention. "Today, GST outflows are also going to show may be around INR 1 trillion widening (of the deficit)." Traders estimated the RBI sold $7 billion-$8 billion last week to support the rupee, leading to a liquidity drain of around INR 650 billion from the banking system.

The weighted average rate in the broader tri-party repo market was 5.30%, up from 5.07% Saturday and 5.08% Friday. The rate closed at 5.70%, well above the marginal standing facility rate of 5.50%, due to a surge of demand from banks. Funding needs remained high amid the GST outflows, while the subscription at the RBI's variable rate repo auction was poor.

The RBI had conducted a two-day, INR-1-trillion auction at 0930-1000 IST to infuse transient liquidity, the sixth in the current reporting fortnight. It accepted all bids worth INR 155.07 billion, much lower than the median INR-725-billion estimate in an Informist poll, at a cut-off rate of 5.26%. 

Banks had not tendered bids for the two-day auction as the prevailing tri-party repo rate during the bidding time was lower than the minimum cut-off for the VRR, at 5.26%, dealers said. The TREPS rate has been volatile in recent days, hitting 5.87% on Thursday, with outflows for advance tax and GST payments likely to drain around INR 3.5 trillion by Tuesday. Banking system liquidity has already swung into a deficit last week for the first time since October before the GST payments. The Reserve Bank of India will hold an overnight variable rate repo auction for INR 750 billion from 0930 IST to 1000 IST Tuesday, the central bank said Monday after market hours.

OUTLOOK

On Tuesday, the one-day call money rate may open above the RBI's repo rate of 5.25%, as the liquidity deficit is expected to widen due to the payments of goods and services tax. During the day, the one-day call money rate is seen moving in a range of 4.80-5.30%, dealers said.

As some market participants expected, the Reserve Bank of India will hold an overnight variable rate repo auction for INR 750 billion from 0930 IST to 1000 IST Tuesday, the central bank said Monday after market hours.

CALL RATE

5.46%--Monday's close for one-day loans

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

4.75%--Saturday's close for two-day loans

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Near RBI's MSF rate on outflows for GST payments; seen up Mon

MUMBAI – The one-day interbank call rate was near the Reserve Bank of India's marginal standing facility of 5.50% due to outflows for goods and services tax payments and early demand for funds from primary dealerships, dealers said. For the day, they expect rates to remain near the repo rate, mostly towards the higher-end of the liquidity adjustment facility corridor as outflows worth INR 1 trillion are expected Monday.

At 0947 IST, the one-day call rate was 5.47%, higher than Saturday's close of 4.75%. The weighted average call rate was 5.45%, against 4.77% Saturday. The weighted average rate in the wider tri-party repo market, which includes mutual funds, was 5.18%, against 5.07% on Saturday.

The RBI's net injection into the banking system – a proxy for the liquidity deficit – was INR 374.1 billion Friday, higher than a net injection of INR 299.10 billion Thursday. Although there were inflows of INR 500 billion from the central bank's bond purchases at the open market operation auction held Thursday, Friday's liquidity deficit widened as there were some outflows for GST payments. 

"As Saturday and Sunday were holidays, some corporates preferred paying GST on Friday itself. Around 20,000-30,000 crore (INR 200 billion to INR 300 billion outflows for GST payments) were seen Friday," a dealer at a state-owned bank said. "Even on Saturday there were some GST payments happening," the dealer said. Dealers expect a total of INR 1.8 trillion to INR 2 trillion outflows for GST payments in December.   

The central bank conducted a two-day VRR auction of INR 1 trillion Monday, the sixth for this fortnight, keeping in mind the total outflows of INR 1.8 trillion to INR 2 trillion for GST payments. The central bank is likely to set a cut-off of 5.26% and subscription is estimated to be INR 725 billion, according to the median of an Informist poll of 10 market participants. So far this fortnight, the RBI infused INR 2.59 trillion of transient liquidity, of which INR 1.02 trillion was reversed. 

End

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

Edited by Akul Nishant Akhoury

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