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Informist, Wednesday, Jan. 28, 2026

By Vaishali Tyagi and J. Navya Sruthi

NEW DELHI – The one-day interbank call money rate ended above the Reserve Bank of India's repo rate Wednesday owing to strong demand for funds due to scheduled outflows during the day as liquidity in the banking system remained tight, which pushed rates higher, dealers said. 

The one-day call rate ended at 5.35% Wednesday, lower than the one-day call rate of 5.40% Tuesday. The weighted average call rate was 5.26%, lower than 5.40% Tuesday. The weighted average rate in the broader tri-party repo market remained flat at 5.16%. 

"Rates rose as there were payments for state bond auction, which drained the already-low liquidity further," a dealer at a state-owned bank said. The net liquidity absorbed from the banking system by the RBI – a proxy for the liquidity surplus – was INR 836.87 billion Tuesday, up from INR 569.87 billion Monday.

"Participation was also very poor in today's (Wednesday's) VRR auction. This is again because rates in TREPS were lower then," the dealer added. The RBI also conducted a two-day variable rate repo auction for INR 500 billion between 0930 IST and 1000 IST Wednesday to support liquidity in the banking system. But the subscription was only INR 62.35 billion with cut-off at 5.26%. 

The dealer mentioned above said the RBI may conduct another VRR auction as the liquidity surplus is expected to fall to INR 200 billion to INR 300 billion Wednesday. "Liquidity may go to deficit by tomorrow (Thursday) as there will be T-bill auction outflows too," the dealer said. Dealers said that the RBI will conduct either an overnight or four-day auction to support liquidity before the government's month-end inflows start. The amount for the auction is likely to be between INR 500 billion and INR 1 trillion.    

The RBI Friday announced several measures to infuse liquidity into the financial system. The RBI is set to hold a 90-day VRR auction for INR 250 billion Friday. It will also 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 each through OMOs.

OUTLOOK

On Thursday, the one-day call money rate may open at 5.40% or above due to tight liquidity in the banking system. During the day, the call money rate is expected to move in a range of 4.50-5.40%, dealers said.

CALL RATE

5.35%--Wednesday's close for one-day loans

5.30%--Wednesday's open for one-day loans

5.40%--Tuesday'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 of 5.25% on early demand for funds

MUMBAI – The interbank call money rate was above the Reserve Bank of India's repo rate of 5.25% due to early demand for funds from primary dealerships, dealers said. However, rates in both the call and tri-party repo markets opened lower than the previous day as liquidity surplus in the banking system increased.   

At 0938 IST, the one-day call rate was at 5.30%, down from Monday's close of 5.40%. The weighted average call rate was also at 5.30%, compared to 5.40% on Monday. The weighted average rate in the wider tri-party repo market, which includes mutual funds, was 5.12%, much lower than 5.16% the previous trading day.

"TREPS opened lower as surplus rose. Call is expected to fall later as no major outflows are there," a dealer at a private bank said. The net liquidity absorbed from the banking system by the RBI – a proxy for the liquidity surplus – was INR 836.87 billion Tuesday, up from INR 569.87 billion Monday.

The RBI also conducted a two-day variable rate repo auction for INR 500 billion between 0930 IST and 1000 IST Wednesday to support liquidity in the banking system. The central bank is likely to set a cut-off of 5.26% in Wednesday's auction with the subscription seen at INR 200 billion, according to an Informist poll of 10 participants. 

"It (two-day VRR) may be under-subscribed because TREPS rates are lower, and we also have OMO (open market operations auction) and another VRR scheduled this week. Also, government spending will start from tomorrow (Thursday)," a dealer at a small finance bank said.  

The RBI Friday announced several measures to infuse liquidity into the financial system. The RBI is set to hold a 90-day VRR auction for INR 250 billion Friday. It will also 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. (J. Navya Sruthi)

End

Edited by Tanima Banerjee

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