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Informist, Wednesday, Dec. 24, 2025

By Vaishali Tyagi

MUMBAI – The two-day interbank call rate ended flat Wednesday and below the Reserve Bank of India's standing facility rate of 5.00% as demand for funds eased after the central bank held variable rate repo auction earlier in the day, dealers said. However, at open, the two-day interbank call rate was above the Reserve Bank of India's marginal standing facility rate of 5.50% owing to the liquidity crunch in the banking system, dealers said. Early demand for funds from primary dealerships also drove the rise in rates, dealers said.

The two-day call rate ended at 4.80%, flat compared to Tuesday. However, the weighted average call rate was above the repo rate at 5.47% and also above Tuesday's rate of 5.42%. The weighted average rate in the broader tri-party repo market was 5.31%, higher from 5.23% on Tuesday. The tri-party repo rate closed at 5.36%. Earlier in the day, the overnight tri-party repo rate rose to a high of 5.51%.

Dealers said weighted average call rate rose due to the lack of full subscription at VRR auction, but it cooled off later as early demand for funds discontinued. RBI took all bids worth INR 873.47 billion at two-day VRR auction for INR 1.25 trillion. The RBI's net injection into the banking system – a proxy for the liquidity deficit – was INR 616.36 billion on Tuesday, higher than the net injection of INR 548.52 billion on Monday.

"Earlier, there was tightness but RBI gave the liquidity by conducting VRR and amount accepted was over 87,000 crore rupees (INR 870 billion), so it helped rates to come down," a dealer at a private bank said. "Also, rates will remain below repo rate as there will be infusion of durable liquidity as well by RBI."

Dealers said government spending will pick up as month-end approaches, easing liquidity pressure, so rates are likely to stay below the repo rate. The Reserve Bank of India will hold a four-day variable rate repo auction for INR 1.75 trillion from 0930 IST to 1000 IST Friday, the central bank said Wednesday after market hours.

When asked about Thursday being Christmas Day holiday and any potential effect on call money rate, the dealer quoted above said rates will not be much impacted when the market opens on Friday, as there are no major outflows scheduled. Goods and services tax payment outflows are also mostly done now.

OUTLOOK

On Friday, the three-day call money rate may open below the RBI's repo rate of 5.25% due to no major outflows on that day. During the day, the three-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 a four-day variable rate repo auction for INR 1.75 trillion from 0930 IST to 1000 IST Fri, the central bank said Wednesday after market hours.

CALL RATE

4.80%--Wednesday's close for two-day loans

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

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

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Above RBI's MSF rate on wider liquidity deficit, demand for funds

MUMBAI – The two-day interbank call rate was above the Reserve Bank of India's marginal standing facility rate of 5.50% as the liquidity crunch in the banking system rose Tuesday, 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 616.36 billion on Tuesday, higher than the net injection of INR 548.52 billion on Monday. "Although GST outflows were done, there were a few credit offtaking as it quarter-end (which widened the liquidity deficit in the banking system)," a dealer at a state-owned bank said. Dealers estimate around INR 1.8 trillion outflows for goods and services tax payments.

At 1003 IST, the two-day call rate was 5.55%, higher than Tuesday's close of 4.80%. The weighted average call rate was also 5.55%, higher than 5.42% Tuesday. The weighted average rate in the wider tri-party repo market, which includes mutual funds, was 5.26%, slightly higher than 5.23%.

"Rates can be slightly on higher side because it is two-day call. But if there is full subscription in VRR (variable rate repo auction) then rates may be around repo," the dealer said. After infusing INR 3.88 trillion of transient liquidity through eight VRR auctions so far this fortnight, the central bank has conducted two-day VRR auction of INR 1.25 trillion from 0930 IST to 1000 IST on Wednesday.   

Of the total liquidity infused so far, INR 2.86 trillion has been reversed. Three VRR auctions held on Monday and Tuesday, maturing Wednesday, will drain INR 1.28 trillion from the banking system.

According to an Informist poll of nine market participants, the central bank is likely to set a cut-off of 5.26% with a median of INR 1 trillion at Wednesday's two-day VRR auction. However, a few dealers expect the subscription to be around INR 625 billion. "There are no major outflows today (Wednesday) and month-end inflows will start from 27th. I don't think it will be fully subscribed," a dealer at another state-owned bank said. 

Edited by Deepshikha Bhardwaj

End 

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