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Informist, Thursday, Jan. 1, 2026

By Aaryan Khanna

NEW DELHI – The one-day interbank call money rate ended below the Reserve Bank of India's standing deposit facility rate of 5.00% Thursday as banking system liquidity swung into surplus for the first time in over two weeks. Demand for funds was also lower after banks met their quarter-end needs and fulfilled reporting requirements for maintaining the cash reserve ratio Wednesday, dealers said. 

The one-day call rate ended at 4.85%, flat against Wednesday's close. Even with the surplus, liquidity was tight and banks met their funding demand early in the day near the RBI's Marginal Standing Facility rate of 5.50%. However, the weighted average call rate was 5.35% Thursday, sharply down from 5.56% Wednesday. The weighted average rate in the broader tri-party repo market also eased to 5.20%, below the repo rate from 5.33% in the previous session.

The net liquidity absorbed into the banking system by the RBI--a proxy for liquidity surplus--was INR 173.35 billion Wednesday, against INR 86.04 billion of net liquidity injected Tuesday, signalling a liquidity deficit. Wednesday was the first time banking system liquidity was in surplus since Dec. 15. This was due to the government's usual spending for salaries and pensions at the month-end, dealers said.

"We have got through December somehow and that is always the worst time of the year for liquidity, except for March of course," a dealer at a private-sector bank said. "The government must have a massive cash pile-up right now. It doesn't look like they are spending in a hurry but some of it came in today (Thursday) and some of it is already showing up in the liquidity."

State-owned banks, which had turned borrowers earlier this week, were not lenders but did not borrow a large quantum from the interbank money markets Thursday, dealers said. At the INR-1-trillion, overnight variable rate repo auction held at 0930-1000 IST, the RBI accepted all bids worth INR 577.97 billion from banks and primary dealerships. Two VRR auctions worth INR 1.74 trillion matured Thursday.

OUTLOOK

On Friday, the three-day call money rate may open above the RBI's repo rate of 5.25% due to early demand for funds. An expected increase in the liquidity surplus and the RBI's INR-1-trillion, five-day variable rate repo auction at 0930-1000 IST are likely to keep a cap on rates below the Marginal Standing Facility rate of 5.50%, dealers said.

Systemic liquidity is seen returning to a comfortable surplus only by mid-January, after two tranches of open market operation auctions add INR 1 trillion of liquidity by Jan. 12 and a three-year $10 billion dollar-rupee buy-sell swap auction on Jan. 13 that will add to durable liquidity. That may cause the central bank to begin conducting variable rate reverse repo auctions soon, dealers said. During the day, the one-day call money rate is expected to move in a range of 4.70-5.50%, dealers said. 

CALL RATE

4.85%--Thursday's close for one-day loans

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

4.85%--Wednesday's close for one-day loans

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Above RBI's repo rate due to early demand for funds

MUMBAI – The interbank call money rate was above the Reserve Bank of India's repo rate of 5.25% on early demand for funds from primary dealerships and low liquidity surplus in the system, dealers said. They expect rates to fall below the repo rate as more inflows due to government spending are expected into the banking system during the day.     

At 1011 IST, the one-day call rate was 5.35%, higher than Wednesday's close of 4.85%. The weighted average call rate was 5.45%, lower than 5.56% on Wednesday. The weighted average rate in the wider tri-party repo market, which includes mutual funds, was 5.24%, against 5.33% in the previous session.   

The net liquidity absorbed into the banking system by the RBI--a proxy for the liquidity surplus--was INR 173.35 billion Wednesday, against a liquidity deficit of INR 86.04 billion Tuesday. Liquidity in the banking system was in surplus Wednesday due to the government's month-end spending.

"While most government spending was done yesterday (Wednesday), we will see (the) rest today (Thursday)," a dealer at a state-owned bank said. These inflows will also weigh on rates, taking rates to around the RBI's repo rate, the dealer said.  

The RBI conducted an overnight variable rate repo auction for INR 1 trillion between 0930 IST and 1000 IST Thursday. According to an Informist poll of 11 participants, the RBI is likely to set a cut-off of 5.26% at the auction and the median is INR 625 billion. 

Including Thursday's auction, the central bank conducted 14 VRR auctions and infused INR 8.52 trillion of temporary liquidity in the banking system. The liquidity was in deficit from Dec. 16 to Dec. 29. The reversal of the amount through two VRR auctions conducted this week has been completed Thursday, leaving no temporary liquidity from the earlier auctions.  End

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

Edited by Akul Nishant Akhoury

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