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Informist, Monday, Jan. 12, 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 5.25% after primary dealerships met their borrowing requirements in the first half. Though systemic liquidity conditions remained tight, an influx of liquidity with mutual funds weighed on money market rates, dealers said. 

The one-day call rate ended at 4.75% against 5.30% for three-day loans Friday. The weighted average call rate Monday was 5.32%, down from 5.44% the previous day. The weighted average rate in the broader tri-party repo market was 5.06%, down from 5.20% Friday and trending towards the SDF rate of 5.00%.

"There is constant lending in every one of the CROMS (Clearcorp Repo Order Matching System) buckets," a dealer at a private-sector bank said. "It looks like mutual funds again have cash to deploy after the crunch last week."

The net liquidity absorbed from the banking system by the RBI--a proxy for the liquidity surplus--was INR 298.72 billion, from INR 212.99 billion Friday and a deficit on Thursday. Liquidity conditions improved after the redemption and coupon payment of the 7.59%, 2026 bond, maturing Sunday, was transacted on Friday itself, dealers said. However, the settlement of the central bank's dollar sales from last week may still be weighing on systemic liquidity, they said.

The RBI had to infuse INR 1.27 trillion of transient liquidity through two four-day VRR auctions Friday against the maturity of only INR 901.24 billion. This liquidity injected has kept the overall net liquidity absorbed number low over the weekend, which may improve by Tuesday with the settlement of the RBI's INR 500-billion open market operation auction to buy bonds and also the maturity of the two VRRs, dealers said. 

"The (triparty repo) rates are really low today (Monday), they are back to below repo rate," a dealer at a state-owned bank said. "I think the only reason why liquidity surplus is so low is because of the VRR (variable rate repo) overhang, otherwise there is enough liquidity in the system."

OUTLOOK

The one-day call money rate on Tuesday may open near the RBI's repo rate of 5.25% on the back of early demand for funds amid tight liquidity. Liquidity conditions will improve this week after the redemption and coupon payment of the 7.59%, 2026 bond added nearly INR 1 trillion of liquidity into the banking system.

The settlement of the RBI's INR 500-billion OMO auction will also add to the banking system liquidity Tuesday and reduce demand for funds, dealers said. Some dealers were still of the view the RBI would need to conduct a VRR auction of up to INR 750 billion as the maturity of two VRR auctions drain nearly INR 1.3 trillion from the banking system Tuesday. 

By the end of the week, the central bank will no longer have to conduct liquidity injections and may even withdraw transient liquidity through a variable rate reverse repo auction, dealers said. A three-year, $10 billion dollar-rupee buy-sell swap auction on Tuesday will add to durable liquidity by Friday. During the day, the one-day call money rate is expected to move in the range of 4.70-5.50%, dealers said. 

CALL RATE

4.75%--Monday's close for one-day loans

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

5.30%--Friday's close for three-day loans

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call:Above repo; surplus remains low despite INR-1-tln bond redemption

MUMBAI – The one-day interbank call money rate was above the Reserve Bank of India's repo rate of 5.25%, and near the marginal standing facility, as liquidity remained tight in the banking system due to the settlement of the central bank's operations in the foreign exchange market to limit a fall in the rupee against the dollar, dealers said. Although inflows of nearly INR 1.00 trillion came into the banking system Friday following the redemption of the 7.59%, 2026 gilt, it failed to significantly ease systemic liquidity, dealers added.

At 1005 IST, the one-day call rate was 5.40%, higher than 5.30% at Friday's close for three-day loans. The weighted average call rate was at 5.40%, against 5.44% Friday. The weighted average rate in the wider tri-party repo market, which includes mutual funds, was 5.20%, the same as Friday. The net liquidity absorbed from the banking system by the RBI--a proxy for the liquidity surplus--was INR 212.99 billion Friday, against a net injected liquidity of INR 193.10 billion Thursday.

The redemption of the 7.59%, 2026 gilt, which matured on Sunday, brought inflows of INR 907.86 billion into the banking system Friday itself, dealers said. That gave some comfort on the liquidity front to market segments such as primary dealerships and mutual funds which held the bond, they said. The upward pressure seen in triparty repo rates last week eased Monday as mutual funds had cash to lend due to inflows, dealers said.  

However, while systemic liquidity returned to a surplus from a deficit after the bond redemption, the settlement of the RBI's foreign exchange transactions offset the inflows and capped the surplus to below INR 300 billion, dealers said. Traders now await the settlement of the INR-500-billion open market operation auction Tuesday, which was conducted earlier Monday, along with the settlement of the RBI's scheduled three-year, $10 billion dollar-rupee buy-sell swap auction—which will be held Tuesday. Both these operations are expected to bring the liquidity surplus closer to the comfortable INR-1.00-trillion mark.  

"Around one lakh crore (INR 1.00 trillion) has gone because of the RBI's intervention either on Thursday or Friday," a dealer at a state-owned bank said. "The bond redemption was done on Friday itself, but there is (foreign exchange) settlement (by the RBI) going on. Today (Monday) also there is some intervention going on."   End

US$1 = INR 90.15

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

Edited by Deepshikha Bhardwaj

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