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Informist, Monday, Jan. 5, 2026

By Cassandra Carvalho and J. Navya Sruthi

MUMBAI – The one-day interbank call money rate ended above the Reserve Bank of India's repo rate of 5.25% Monday, even as several banks now have excess liquidity and increased their cash reserves. The system-wide liquidity surplus was still tight and remained under INR 1.00 trillion over the weekend. Current liquidity did not reflect significant inflows from the Centre's salary and pension payments, dealers said. 

The one-day call rate ended at 5.40%, against 4.75% at Saturday's close for two-day loans. The weighted average call rate was 5.40% Monday, against 4.75% the previous session. The weighted average rate in the broader tri-party repo market was 5.15%, down from 5.22% in the previous session. The net liquidity absorbed from the banking system by the RBI--a proxy for the liquidity surplus--was INR 497.02 billion Sunday, down from INR 513.38 billion Saturday and INR 614.47 billion Friday. Some government inflows are yet to come into the banking system, dealers said.

"If we consider cash balances then total liquidity is almost 1 lakh crore (INR 1 trillion). Currently, there are no major scheduled outflows or inflows till Wednesday so rates may remain in a range slightly towards SDF (Standing Deposit Facility) because of OMO (settlement)," a dealer at a state-owned bank said. "Around (INR) 250 billion to (INR) 300 billion outflows are expected for excise duty on Jan. 7 (Wednesday)." Cash balances with the RBI were INR 7.92 trillion Sunday, from INR 7.81 trillion Friday, against the requirement of INR 7.48 trillion for the fortnight ending Jan. 15. 

Traders played on spreads between the triparty repo rates and the call money rate, dealers said, by borrowing at lower rates in TREPS and deploying it in the call money market, dealers said. Credit disbursements in the new calendar year so far have slowed down, and banks have been borrowing money to fund their investments, such as in the government bond market, dealers said. State-owned banks net bought gilts worth INR 92.55 billion in the secondary gilt market Monday, according to data from Clearing Corp. of India. 

"Loans have slowed down, so banks are borrowing to put into investments. There are no IPOs or anything as such right now," a dealer at a small finance bank said. "The liquidity is comfortable but yes, it's not as much as it should've been by now."

OUTLOOK

On Tuesday, the one-day call money rate may open near the RBI's repo rate of 5.25% as the liquidity surplus is expected to remain under INR 1.00 trillion. Later in the day, rates may ease due to Tuesday's settlement of the RBI's INR-500-billion open market operation auction conducted Monday. Some traders still expect the RBI to conduct a variable rate repo auction of INR 250 billion to INR 500 billion Tuesday. Later in the week, outflows for excise duty payments will put pressure on systemic liquidity, dealers said.

Systemic liquidity is seen returning to a comfortable surplus by next week, 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

5.40%--Monday's close for one-day loans

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

4.75%--Saturday's close for two-day loans

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: At RBI's MSF rate on demand for funds, tight systemic liquidity

MUMBAI - The interbank call money rate was at the Reserve Bank of India's marginal standing facility rate of 5.50% due to early demand for funds from primary dealerships Monday, dealers said. Systemic liquidity was also tight as it was below INR 1 trillion, which also supported the spike in the rate. 

At 0953 IST, the one-day call rate was 5.50%, higher than Saturday's close of 4.75% for two-day loans. The weighted average call rate was 5.50%, against 4.75% on Saturday. The weighted average rate in the wider tri-party repo market, which includes mutual funds, was at 5.25%, slightly higher than 5.22% on the previous trading day.  

The net liquidity absorbed from the banking system by the RBI – a proxy for the liquidity surplus – was INR 614.47 billion Friday, higher than INR 238.65 billion Thursday. Liquidity surplus in the banking system was up Friday due to inflows from the government's spending on salaries and pensions. Also, cash balances with the RBI were higher at INR 7.81 trillion Friday, against the requirement of INR 7.48 trillion for the fortnight ending Jan. 15. 

"Liquidity surplus is low and there are more borrowers in the market which is pushing rates higher," a dealer at a private bank said. Dealers were expecting the liquidity surplus to be INR 1 trillion last week, supported by the government's month-end spending. They expect liquidity to rise from INR 614.47 billion over the weekend. 

To support the system's liquidity, the RBI conducted an overnight variable rate repo auction for INR 500 billion between 0930 IST and 1000 IST Monday. According to an Informist poll of nine participants, the RBI is likely to set a cut-off of 5.26% at the auction and the median is INR 387.50 billion. There was a mixed response by the market.

A few dealers expect the auctioned amount to be fully subscribed due to more borrowers in the market, while some expect a tepid response as they think there is enough liquidity surplus in the system. 

Monday's VRR auction is the central bank's 16th auction since Dec. 15. From then till Friday, the RBI infused INR 9.10 trillion of temporary liquidity into the banking system. Liquidity was in deficit from Dec. 16 to Dec. 29. Barring Friday's VRR auction, which infused INR 257.95 billion transient liquidity, the reversal of all the rest of the auctions conducted was completed Friday. The reversal of Friday's five-day VRR auction is due Wednesday. (J. Navya Sruthi)

End

US$1 = INR 90.2775

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

Edited by Akul Nishant Akhoury

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