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Informist, Tuesday, Dec. 30, 2025

By Cassandra Carvalho

MUMBAI – The one-day interbank call money rate ended near the Reserve Bank of India's marginal standing facility rate of 5.50% Tuesday because of urgent funding requirements towards the end of the session amidst a liquidity deficit and high credit disbursements with the December quarter almost at an end, dealers said. Large state-owned banks--which are usually lenders in the call money market--were on the borrowing side Tuesday because of heavy disbursements, they said.

The one-day call rate ended at 5.48% against 5.20% Monday. The weighted average call rate was 5.48% Tuesday, same as Monday. The weighted average call rate was near the marginal standing facility rate for the fourth day running. The weighted average rate in the broader tri-party repo market was 5.29%, above the repo rate and up from 5.23% Monday. The net liquidity injected into the banking system by the RBI--a proxy for the liquidity deficit--was INR 715.84 billion Monday, up from INR 623.02 billion Sunday.

Five trades adding up to INR 11 billion were conducted between 1855 IST and 1858 IST at a rate of 5.48%, likely due to urgent loan disbursements, dealers said. "Due to quarter closing, many of the banks, maybe PSUs (state-owned banks), also are on the borrowing side due to credit offtake during quarter-end," a dealer at a state-owned bank said. "The problem is after close (bank timings) branches are yet to confirm the credit offtake, a branch may not get confirmation from customer side. Only after 4 or 5 pm (1600 or 1700 IST) they start confirming the offtake."

The settlement of the RBI's open market operations auction conducted Monday is expected to have added INR 500 billion to durable systemic liquidity Tuesday. Despite this inflow, systemic liquidity is likely to have remained in a deficit. The Centre's month-end expenditure is likely to begin Wednesday, dealers said. Systemic liquidity, however, is seen returning to a surplus only by mid-January. Along with credit disbursements, demand for reporting requirements Wednesday also aided the rise in rates.

The RBI's INR 2-trillion two-day variable rate repo auction was not fully subscribed Tuesday, and the RBI took all bids worth INR 1.44 trillion. Traders were hoping the tri-party repo rate would fall later in the day and did not aggressively bid at the auction, dealers said. However, TREPS rates remained elevated during the day owing to the lack of major lending from mutual funds and banks. Mutual funds are likely facing month-end redemption pressures while banks have a shortage of funds due to loan disbursements, dealers said. 

OUTLOOK

On Wednesday, the one-day call money rate may open near the RBI's marginal standing facility rate of 5.50% owing to reporting requirements on the last day of the month. Heavy quarter-end disbursements are likely to push rates up amid a liquidity deficit, dealers said. Some dealers expect the RBI to conduct an overnight variable rate repo auction of INR 500 billion. 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

5.48%--Tuesday's close for one-day loans

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

5.20%--Monday'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 widened liquidity deficit, VRR reversals

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 as liquidity deficit widened in the banking system, dealers said. Further, the reversal of INR 2.03 trillion through two four-day variable rate repo auctions conducted Friday is on Tuesday, leaving no transient liquidity in the banking system.

At 1004 IST, the one-day call rate was 5.60%, higher than Monday's close of 5.20%. The weighted average call rate was 5.59%, higher than 5.48% on Monday. The weighted average rate in the wider tri-party repo market, which includes mutual funds, was 5.28% against 5.23% in the previous session.

The RBI's net liquidity injected into the banking system – a proxy for the liquidity deficit – was INR 715.84 billion Monday, higher than INR 623.02 billion Sunday. The liquidity deficit widened Monday due to outflows of INR 320 billion for gilts auction which had happened on Friday, dealers said.

When asked about the government's month-end spending, dealers said that while they had expected it to start on Monday, it did not happen. "Not necessarily (month-end spending will start on 29th of every month), mostly by today we will see the change in liquidity due to government spending," a dealer at a state-owned bank said. "Liquidity surplus may be around 50,000 crore (INR 500 billion) for Tuesday because of OMO (open market operations auction) and government spending," the dealer said. 

The RBI Tuesday conducted its 12th VRR auction in the second half of December between 0930 IST and 1000 IST. According to the Informist poll, the subscription for the two-day VRR auction of INR 2 trillion is seen at INR 1.88 trillion with the cut-off at 5.26%.  

However, a few dealers also said they will be bidding at 5.27% due to more borrowers in the market amid liquidity crunch since Dec. 16.  (J. Navya Sruthi)

End

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

Edited by Rajeev Pai

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