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Informist, Monday, Dec. 29, 2025

By Cassandra Carvalho

MUMBAI – The one-day interbank call money rate ended below the Reserve Bank of India's repo rate of 5.25% Monday as demand for funds eased near the end of trade. However, the weighted average call rate was near the Marginal Standing Facility rate of 5.50% for the third straight day due to tight liquidity conditions and quarter-end disbursements, dealers said. 

The one-day call rate ended at 5.20% against 4.85% for three-day loans Friday. The weighted average call rate was 5.48% Monday compared with 5.46% in the previous session. The weighted average rate in the broader tri-party repo market was 5.23%, inching lower from 5.25% Friday.

The RBI's net liquidity injected into the banking system--a proxy for the liquidity deficit--was INR 623.02 billion Sunday, similar to Saturday and Friday, but lower than INR 845.24 billion Thursday. Amid the liquidity deficit, disbursements for the end of the December quarter pushed up demand for funds, dealers said. On Wednesday, demand for fortnightly requirements may add to the upward pressure on rates, dealers said.  

The RBI after market hours said it will conduct a two-day variable rate repo auction of INR 2.00 trillion Tuesday. Traders were expecting the central bank to conduct a VRR of at least INR 1.50 trillion Monday itself. Two VRR auctions of four-day tenures, totalling INR 2.03 trillion, will reverse on Tuesday. The auction is likely to be subscribed for at least 70% of the notified amount, dealers said. The government's month-end inflows for pensions and salary payments were yet to begin in large quantums, and were neglible Monday, dealers said. 

"By Jan. 15, we will be in surplus because there will be OMOs and the swap (dollar-rupee buy-sell swap) that will add to durable liquidity, along with month-end (government) spending, but now because of quarter-end, and some rupee intervention, we're in deficit and there is high demand for credit," a dealer at a private sector bank said. 

Settlement of the RBI's open market operation auction conducted Monday will add INR 500 billion to durable systemic liquidity Tuesday. In January, the RBI will conduct three more such auctions of the same notified amount, along with a $10 billion, three-year dollar-rupee buy-sell auction. However, until Wednesday, the last day of the December quarter, loan disbursements will keep money market rates elevated, dealers said.   

OUTLOOK

On Tuesday, the one-day call money rate may open above the RBI's repo rate of 5.50% due to the prevailing liquidity deficit in the financial system. However, due to the two-day VRR scheduled, rates may ease later in the day. The RBI will hold a two-day variable rate repo auction for INR 2.00 trillion at 0930-1000 IST Tuesday. The auction is likely to be subscribed for at least 70% of the notified amount, dealers said.

Inflows of INR 500 billion due to settlement of the RBI's OMO auction Tuesday will aid the banking system liquidity. Wednesday, demand for fortnightly requirements may add to the upward pressure on rates, dealers said. During the day, the one-day call money rate is expected to move in a range of 4.70-5.65%, dealers said. 

CALL RATE

5.20%--Monday's close for one-day loans

5.60%--Monday's open for one-day loans

4.85%--Friday's close for three-day loans

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Above RBI's MSF on firm demand for funds amid liquidity deficit

MUMBAI – The interbank call money rate was above the Reserve Bank of India's marginal standing facility rate of 5.50% due to firm demand for funds amid a liquidity deficit in the banking system, dealers said. They expect another variable rate repo auction before the end of this fortnight to support the liquidity in the banking system.   

At 0956 IST, the one-day call rate was 5.57%, against 4.85% for three-day loans Friday. The weighted average call rate was 5.58%, higher than 5.46% Friday. The weighted average rate in the wider tri-party repo market, which includes mutual funds, was 5.31%, higher than 5.25% in the previous session.

The RBI's net liquidity injected into the banking system – a proxy for the liquidity deficit – was INR 626.74 billion Friday, lower than INR 845.24 billion Thursday. The liquidity deficit narrowed slightly Friday on the government's month-end spending, dealers said. They further expect the liquidity deficit to narrow to INR 250 billion over the weekend.  

Although the liquidity deficit narrowed slightly on Friday, dealers said rates in call and tri-party repo markets are likely to remain on the higher end of the liquidity adjustment facility corridor unless liquidity in the banking system is surplus. "We expect liquidity surplus by tomorrow (Tuesday) or by 1st (Jan. 1), maybe around 50,000 crore (INR 500 billion) because of government spending," a dealer at a private bank said. 

Dealers also said the month-end redemption pressure faced by the mutual funds is also supporting rates. "TREPS is higher as most mutual funds face redemption pressure and there are only a few lenders. Market is on borrowing side now," a dealer at another private bank said. 

Market participants expect the central bank to conduct another VRR auction this week to support the liquidity in the system. Dealers expect another two-day VRR auction, while the amount depends on Monday's open market operations auction. The RBI is conducting an INR-500-billion open market operations auction from 0930 IST to 1030 IST.  

The interbank call money rate opened above the RBI's repo rate of 5.25% so far since Dec. 15 and was dealt above the RBI's MSF rate for the fourth consecutive day Monday while liquidity remained in deficit since Dec. 16. To support liquidity in the banking system amid outflows pressure for advance tax and goods and services tax payments, the RBI conducted 11 VRR auctions and infused INR 6.78 trillion transient liquidity in the banking system. Currently, INR 2.03 trillion temporary liquidity is available in the system through two four-day VRR auctions conducted on Friday. (J. Navya Sruthi) 

End

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

Edited by Akul Nishant Akhoury

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