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Informist, Saturday, Jan. 31, 2026

 

By Janwee Prajapati

 

MUMBAI - The two-day interbank call money rate ended below the RBI's Standing Deposit Facility rate of 5.00% on Saturday, as demand for funds eased after the central bank conducted two 90-day variable repo rate auctions to boost liquidity in the banking system, dealers said. However, traders remained cautious ahead of the Union Budget for 2026-27 (Apr-Mar) to be released Sunday.

 

The two-day call rate ended at 4.75% Saturday, lower than the three-day call rate of 4.80% Friday. The weighted average call rate was 5.28%, lower than 5.49% Friday. The weighted average rate in the broader tri-party repo market was at 5.16%, the same as Friday.

 

After the RBI conducted two 90-day variable rate repo auctions on Friday, call rates eased to below the RBI's repo rate. This drop in call rates influenced short-term borrowing rates, including those on certificates of deposit with similar maturity, dealers said. At the 90-day VRR auctions Friday, the RBI received bids worth INR 950.62 billion in the first INR-250-billion auction and accepted INR 250.04 billion. In the second auction for INR 2 trillion, it accepted all bids worth INR 1.12 trillion. The net liquidity absorbed in the banking system by the RBI – a proxy for the liquidity surplus – was INR 829.68 billion Thursday, up from INR 677.08 billion Wednesday.

 

"These three-month VRRs have reduced the pressure on (call) rates considerably, but there are uncertainties before the Budget (Union Budget for FY27)," a dealer at a state-owned bank said. "...also there will be some month end (government) spending but the government will try to keep its spending restricted since it does not want fiscal deficit to rise and also wants to see a higher GDP number." 

 

Traders will focus on the Centre's borrowing quantum in the Union Budget for FY27 Sunday. Traders were cautious of a higher-than-expected borrowing quantum, which will likely lead to a rise in government bond yields, widening the spread between the 10-year benchmark bond yield (currently 6.48% for 2035) and the RBI's repo rate, potentially leading to a rise in call rates. The Centre's gross borrowing aim is expected to be between INR 16 trillion and INR 17 trillion, compared with INR 14.72 trillion in FY26. 

 

OUTLOOK

On Monday, call money rates will take cues from the Union Budget for FY27 at open. Traders will focus on the Centre's gross borrowing quantum in the Budget, which may impact call rates. However, the one-day call money rate is expected to open below the RBI's repo rate of 5.25% as demand for funds eased after the RBI's variable rate repo auctions on Friday. The call money rate is likely to trade between 5.05-5.20% during the day, dealers said. 

 

Moreover, INR 500 billion of open market operation auction lined up on Thursday will also add to durable liquidity in the system. Some traders are also expecting an announcement of another INR 1 trillion-INR 2-trillion open market operation in the March quarter, which is likely to be announced in the Monetary Policy Committee meeting's outcome on Feb. 6.   

 

CALL RATE

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

5.55%--Saturday's open for three-day loans

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

 

 

End

 

Edited by Tanima Banerjee

 

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