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Informist, Tuesday, Jan. 27, 2026

By Kabir Sharma and Cassandra Carvalho

MUMBAI – The one-day interbank call money rate ended above the Reserve Bank of India's repo rate Tuesday owing to demand for funds on reversal of the five-day variable rate repo auction, dealers said. Rates in the money market remained high despite there being no scheduled outflows during the day. The announcement of a two-day variable rate repo auction Wednesday also did not cool rates. 

The one-day call rate ended at 5.40% Tuesday, higher than the four-day call rate of 5.30% Friday. The weighted average call rate was 5.40%, marginally higher than 5.39% Friday. The weighted average rate in the broader tri-party repo market also rose by 5 basis points to 5.16%.

The RBI is set to hold a 90-day variable repo rate auction for INR 250 billion Friday, but dealers said market participants are hesitant to borrow funds at the auction as they expect the central bank may cut the benchmark rate by the time the auction is reversed. However, the RBI has provided traders with an option to pre-pay the full amount borrowed at the auction at least two days before the maturity date, which is Apr. 30.

"So participation would have been hesitant if there's a view of a cut or RBI thinks that if they cut market might come back saying this impedes transmission," a dealer at a private-sector bank said. "Basically you can't rule out a cut now--just because he's doing a 90-day operation," they said. 

The central bank also announced a two-day variable rate repo auction of INR 500 billion Wednesday. "Since raising money for banks through CDs (certificats of deposit) are on higher side, instead of this bank can participate in VRR," a dealer at a foreign bank said. Rates on three-month CD rose to 7.15-7.20% from 7.05-7.10% Friday, dealers said.

The net liquidity absorbed from the banking system by the RBI--a proxy for the liquidity surplus--was INR 569.87 billion Monday, up from INR 520.53 billion Sunday but down from INR 636.49 billion Friday.

The RBI Friday announced several measures to infuse liquidity into the financial system. Besides the 90-day variable rate repo auction, the longest such operation in recent years, for INR 250 billion Friday, the RBI will conduct a $10 billion, three-year dollar-rupee buy-sell swap auction on Feb. 4, which will infuse rupee liquidity into the banking system. It will also conduct auctions on Thursday and Feb. 5 to buy gilts worth INR 500 billion at each through OMOs.

OUTLOOK

Wednesday, the one-day call money rate may open near or below the RBI's repo rate of 5.25% after the RBI said it will conduct a two-day variable rate repo auction of INR 500 billion at 0930-1000 IST. The RBI also said traders participating at the 90-day variable rate repo auction it will conduct Friday will have the option of prepaying the amount borrowed, easing concerns that the Monetary Policy Committee will no longer cut the repo rate. During the day, the call money rate is expected to move in a range of 4.70-5.55%, dealers said.

CALL RATE

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

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

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

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: At MSF rate on firm demand for funds, reversal of 5-day VRR

MUMBAI – The interbank call money rate was at the Reserve Bank of India's marginal standing facility of 5.50% due to firm demand for funds and the reversal of transient liquidity infused into the system through a five-day variable rate repo auction Thursday, dealers said. They expect rates to fall due to no major outflows scheduled for the day.  

At 0939 IST, the one-day call rate was at 5.50%, up from Friday's close of 5.30% for four-day loans. The weighted average call rate was also at 5.50%, compared to 5.39% on Friday. The weighted average rate in the wider tri-party repo market, which includes mutual funds, was 5.20%, also up from 5.11% the previous trading day.

"Today we have reversal of the five-day VRR which is why rates are higher. But during the day it will fall as it happened on Friday too, as there are no major inflows (scheduled for Tuesday)," a dealer at a private bank said. The reversal of the five-day VRR auction conducted on Thursday, which infused INR 500.1-billion of transient liquidity, is due Tuesday.  

Apart from the five-day VRR auction, the RBI also conducted two other VRR auctions last week, of which one was reversed on Friday. As of Tuesday, INR 265.35 billion of transient liquidity is available in the banking system which was infused through the eight-day VRR auction conducted on Wednesday. The reversal of this VRR auction is due Thursday.

Meanwhile, systemic liquidity rose Friday due to INR 500 billion inflows through open market operation auction conducted last week. The net liquidity absorbed from the banking system by the RBI – a proxy for the liquidity surplus – was INR 636.49 billion Friday, up from INR 101.70 billion Thursday.   

The RBI Friday announced several measures to infuse liquidity into the financial system. The central bank will conduct a 90-day variable rate repo auction, the longest such operation in recent years, for INR 250 billion on Jan. 30. The RBI will conduct a $10 billion, three-year dollar-rupee buy-sell swap auction on Feb. 4, which will infuse rupee liquidity into the banking system. It will also conduct auctions on Feb. 5 and Feb. 12 to buy gilts worth INR 500 billion at each through OMOs.  (J. Navya Sruthi)

End

US$1 = INR 91.72

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

Edited by Rajeev Pai

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