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Informist, Tuesday, Dec. 23, 2025

By Vaishali Tyagi

MUMBAI – The one-day interbank call money rate ended below the Reserve Bank of India's Standing Deposit Facility rate of 5.00% Tuesday as demand for funds eased after the central bank held two variable rate repo auctions during the day, dealers said. 

The one-day call rate ended at 4.80%, down from 5.46% Monday. However, the weighted average call rate was above the repo rate at 5.42% and also above Monday's rate of 5.38%. The weighted average rate in the broader tri-party repo market was 5.23%, lower from 5.30% on Monday. The tri-party repo rate closed at 4.75%. Earlier in the day, the overnight tri-party repo rate rose to a high of 5.46%.

Rates cooled off later Tuesday as demand for funds eased after the RBI held two overnight variable rate repo auctions Tuesday, which injected INR 1.13 trillion. At the first auction, the central bank set a cutoff of 5.26% and accepted bids totalling INR 750.33 billion, compared with INR 1.16 trillion offered. At the second auction, the RBI accepted all INR 376.22 billion bids against the notified amount of INR 500 billion, also at a 5.26% cut-off.  

The RBI's net injection into the banking system – a proxy for the liquidity deficit – was INR 548.52 billion on Monday, slightly lower than the INR 577.21 billion on Sunday. Outflows for goods and services tax payments from Friday to Monday and advance tax payments early last week led to a liquidity crunch in the banking system, lifting rates. 

Dealers said the liquidity deficit in the banking system is likely to remain tight in the near term, driven by festive-season spending. "Call rate has ended down as that liquidity deficit has been bridged after RBI conducted VRRs and therefore there is no more premium has to be paid for fund borrowing," a dealer at a state-owned bank said. Dealers said most goods and services tax-related outflows are over, so rates are likely to remain lower. 

As some market participants expected, the Reserve Bank of India will hold an overnight variable rate repo auction for INR 1.25 billion from 0930 IST to 1000 IST Wednesday, the central bank said Tuesday after market hours.

OUTLOOK

On Wednesday, the one-day call money rate may open below the RBI's repo rate of 5.25%, amid INR 2.31 transient liquidity in the banking system. Dealers also expect the liquidity deficit to narrow due to no major outflows on Tuesday. During the day, the one-day call money rate is expected to move in a range of 4.50-5.65%, dealers said.

The Reserve Bank of India will hold an overnight variable rate repo auction for INR 1.25 billion from 0930 IST to 1000 IST Wednesday, the central bank said Tuesday after market hours.

CALL RATE

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

5.50%--Tuesday's open for one-day loans

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

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: At RBI's MSF rate on liquidity deficit, early demand for funds

MUMBAI – The one-day interbank call rate was at the Reserve Bank of India's marginal standing facility rate of 5.50% due to a liquidity crunch in the banking system, dealers said. Early demand for funds from primary dealerships also drove the spike in rates, dealers said.  

The RBI's net injection into the banking system – a proxy for the liquidity deficit – was INR 548.52 billion on Monday, slightly lower than the net injection of INR 577.21 billion on Sunday. Outflows for goods and services tax payments from Friday to Monday and advance tax payments early last week led to a liquidity crunch in the banking system, lifting rates. 

At 0955 IST, the one-day call rate was 5.50%, higher than Monday's close of 5.46%. The weighted average call rate was 5.51%, higher than 5.38% Monday. The weighted average rate in the wider tri-party repo market, which includes mutual funds, was steady from the previous day at 5.30%. Dealers expect rates to remain in the same range as of Monday.  

While the central bank conducted a two-day variable rate repo auction for INR 750 billion Monday, only INR 155.07 billion was subscribed, as rates in the tri-party market were lower during the auction. "Rates were around 5.18% and so there were few bids in VRR. But rates rose after result on low liquidity," a dealer at a state-owned bank said. 

Further, the RBI is conducting an overnight VRR auction of INR 750 billion from 0930 IST to 1000 IST Tuesday. "Subscription will be better today as there is still tightness (liquidity deficit) in system," the dealer said. "But if rates fall again during auction like it happened yesterday (Monday) then we cannot say," the dealer added. 

According to an Informist poll of 10 market participants, the median estimate for Tuesday's VRR auction is seen at INR 487.50 billion. So far this fortnight, the central bank conducted seven VRR auctions and infused transient liquidity of INR 2.75 trillion. Of that, INR 1.57 trillion was reversed and INR 1.18 trillion of transient liquidity remains in the system.  End

Edited by Saji George Titus

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