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Informist, Tuesday, Feb. 3, 2026

By J. Navya Sruthi

MUMBAI – The interbank call money rate Tuesday ended below the Reserve Bank of India's standing deposit facility of 5% due to surplus liquidity in the banking system. The triparty repo rate slumped as mutual funds turned aggressive lenders after banks likely parked funds in these institutions as the liquidity turned to a comfortable surplus. A few dealers expect the central bank to conduct a variable rate reverse repo auction due to low rates amid excess liquidity, while others said that demand for funds will rise next week for tax outflows, and that the fall in rates is short-lived. 

The one-day call rate ended at 4.40%, flat from the previous day. The weighted average rate in the broader tri-party repo market was 4.40%, also lower than the standing deposit facility rate and 4.57% on Monday. The triparty rate fell due to comfortable liquidity in the banking system, and mutual funds lent funds aggressively, dealers said. The rate fell to a day's low of 3.95%. In fact, the weighted average call rate was 5.06%, a level so low it is usually seen on Saturdays due to low demand for funds in thin trade. The overnight Mumbai Interbank Offered Rate was at 5.13%, the lowest level since Aug. 4, 2022.

The net liquidity absorbed from the banking system by the RBI – a proxy for the liquidity surplus – was INR 1.71 trillion Monday, sharply up from INR 886.42 billion Sunday. Systemic liquidity rose on Monday as cash balances with the central bank came down. Cash balances were at INR 7.97 trillion Monday, lower than INR 8.58 trillion Sunday, but higher than the requirement of INR 7.52 trillion as of Feb. 15. 

"Call rates reflect that everyone is having ample liquidity, and there is no demand. Banks have kept 3 lakh crore (INR 3 trillion) in SDF," a dealer at a state-owned bank said. "There is some positive sentiment now because of trade deal, we'll see some foreign inflows also (which could boost liquidity) but this (low rates) is just a one-time thing, next week again tax outflows will start." Banks parked INR 3.21 trillion with the RBI under SDF Monday. A dealer at a private sector bank said the central bank may announce a VRRR auction for INR 500 billion to INR 1 trillion due to surplus liquidity. 

OUTLOOK

On Wednesday, the one-day call money rate may open below the RBI's repo rate of 5.25% on surplus liquidity and a lack of major scheduled outflows this week. Traders will also track the result of the $10 billion, three-year dollar-rupee buy-sell swap auction Wednesday and its impact on forward dollar-rupee premiums. Any rise in premiums will push up demand for funds as traders would want to play on the arbitrage between rates and receive forward premiums. The call rate is likely to be in the range of 4.40-5.20% during the day, dealers said.

CALL RATE

4.40%--Tuesday's close for one-day loans

5.15%--Tuesday's open for one-day loans

4.40%--Monday's close for one-day loans

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Below repo rate as liquidity improves on govt month-end spending

MUMBAI - The interbank call money rate was below the Reserve Bank of India's repo rate of 5.25% Tuesday due to low demand for funds from banks because of comfortable liquidity conditions, dealers said. The tri-party repo rate was below the RBI's Standing Deposit Facility rate of 5.00% as systemic liquidity rose sharply above the INR 1-trillion level, dealers said. Liquidity improved on account of month-end spending by the government, dealers said.

At 0940 IST, the one-day call rate was at 5.14%, up from Monday's close of 4.40%. The weighted average call rate was at 5.14%, compared to 5.20% on Monday. The rate in the tri-party repo market, which includes mutual funds, was 4.40%, sharply below the standing deposit facility rate. The weighted average rate in the wider tri-party repo market was 4.65%, against 4.57% the previous trading day. 

"There were inflows from government spending and the OMOs (open market purchase of gitls) too, so rates are not expected to go to the higher side today," a dealer at a state-owned bank said. "This amount of liqudity is comfortable for the system, so as the day goes on, you can see both call and TREPS falling further."

The net liquidity absorbed from the banking system by the RBI – a proxy for the liquidity surplus – was INR 1.71 trillion Monday, sharply up from INR 886.42 billion Sunday. Even as systemic liquidity rose on Monday, cash balances with the central bank came down. Cash balances were at INR 7.97 trillion Monday, lower than INR 8.58 trillion Sunday, but higher than the requirement of INR 7.52 trillion as of Feb. 15. 

On Thursday, the RBI bought gilts worth INR 500 billion at the OMO auction. Dealers expect around INR 1.5 trillion inflows from the government's month-end spending. The next major inflows will be around Feb. 9 for excise duty and TDS payments.

The RBI also infused INR 1.37 trillion of temporary liquidity through two 90-day variable rate repo auctions on Friday, which also kept rates on the lower side. The RBI received bids worth INR 950.62 billion at the first 90-day variable rate repo auction where it accepted bids for INR 250.04 billion and then conducted another 90-day VRR for INR 2 trillion. (Kabir Sharma)

End

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

Edited by Deepshikha Bhardwaj

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