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Informist, Thursday, Feb. 5, 2026

 

By J. Navya Sruthi

 

MUMBAI – The interbank call money rate Thursday ended near the Reserve Bank of India's Standing Deposit Facility rate of 5.0% due to the availability of ample surplus liquidity in the banking system, dealers said.

The rate in the tri-party repo market ended way below the RBI's SDF rate at 4.0%.  

 

The one-day call rate ended at 5.05%, against 5.10% the previous session. The weighted average call rate was 5.03%, up from 4.98% Wednesday. The weighted average rate in the broader tri-party repo market, which includes mutual funds, rose to 4.30% from 4.24% on Wednesday.

 

The net liquidity absorbed from the banking system by the RBI – a proxy for the liquidity surplus – fell to INR 1.96 trillion Wednesday from INR 2.17 trillion Tuesday. The slight fall in liquidity was due to payments for state bonds auctioned by the RBI on Tuesday, dealers said. Market participants expect liquidity surplus to remain around INR 2 trillion Thursday as there were no major outflows scheduled other than INR 359.10 billion outflows for T-bill payment.   

 

The cash reserves with the RBI as of Wednesday were up at INR 7.79 trillion from INR 7.66 trillion seen on Tuesday. The average daily cash reserve requirement for the fortnight ending Feb. 15 is INR 7.52 trillion.   

 

"Mutual funds have some amount of cash always with them, so they park on an overnight basis at whatever rate they get," a dealer at a state-owned bank said. "Banks and others who got money from the VRR (variable rate repo auction), they are not seen in the market," the dealer added. "It was because of 90-day VRR (variable rate repo auctions), (overnight) rates are way below SDF and are likely to sustain at this level," a dealer at a primary dealership said. 

 

Inflows from the RBI's open market operations auction and the government's month-end spending added to the systemic liquidity. The RBI bought INR 500 billion in gilts at the OMO auction last week. The RBI also infused INR 1.37 trillion in temporary liquidity through two 90-day variable-rate repo auctions on Friday, which will mature on Apr. 30. 

 

OUTLOOK

On Friday, the three-day call money rate may open above the RBI's SDF rate of 5.00% on demand for funds ahead of the weekend. Dealers said movement of rates will depend on the RBI's Monetary Policy Committee outcome and commentary. They expect the central bank to announce more measures, such as longer-tenure VRR auctions and OMO auctions, to support systemic liquidity. They also expect inflows from foreign investors to increase due to the announcement of the India-US and India-EU trade deals. 

 

Liquidity is expected to increase by Friday, after inflows from the INR-500-billion open market operation auction on Thursday and the first-leg settlement of the $10 billion, three-year dollar-rupee buy-sell swap auction conducted on Wednesday. Traders will watch out for any announcement of a VRRR. The call rate is likely to be in the 4.50-5.15% range during the day, dealers said.

 

CALL RATE

5.05%--Thursday's close for one-day loans

5.10%--Thursday's open for one-day loans

5.10%--Wednesday's close for one-day loans

 

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	THURSDAY	WEDNESDAY
Overnight	5.09	5.04
3-day	--	--
14-day	5.73	5.73
1-month	5.97	5.96
3-month	6.40	6.37

---

India Call: Below repo rate on hefty liquidity surplus; MPC outcome Fri eyed

 

MUMBAI – The interbank call money rate was below the Reserve Bank of India's repo rate of 5.25% on Thursday on account of significant excess surplus liquidity in the banking system, dealers said. Early demand for funds from primary dealerships was met by banks using their cash surplus.

 

At 0933 IST, the one-day call rate was at 5.10%, unchanged from Wednesday's close. The weighted average call rate was also 5.10%, compared to 4.98% on Wednesday. The weighted average rate in the wider tri-party repo market, which includes mutual funds, was 4.18%, against 4.24% the previous trading day.

 

"There's nothing to say on rates when there's 3.5 trillion (INR 3.5 trillion) of liquidity sitting in the system," a dealer at a state-owned bank said. "If there is no action from RBI, rates can fall to even 4%." On Wednesady, durable liquidity in the system was at INR 3.45 trillion, according to RBI data. 

 

The net liquidity absorbed from the banking system by the RBI – a proxy for the liquidity surplus – fell to INR 1.96 trillion Wednesday from INR 2.17 trillion Tuesday. The slight fall in liquidity was on account of payment for state bonds auctioned by the RBI on Tuesday, dealers said.

 

Inflows from RBI's 3-year dollar-rupee swap are likely to add around INR 900 billion to the banking system on Friday. Further, the RBI is scheduled to conduct an open market operation auction of gilts later in the day, which is also likely to add INR 500 billion to the banking system. 

 

Dealers said they expect the RBI to conduct a variable rate reverse repo auction on Thursday to absorb some of the surplus liquidity from the system and support rates. "There will be some measure from them (RBI), most likely a VRRR, as I don't think they would want this sort of liquidity sitting in the system," a dealer at a state-owned bank said. 

 

The next major outflow will be for excise payments, dealers said. Traders will track the outcome of the RBI's Monetary Policy Committee Friday. Traders do not expect a rate cut but expect assurance from the central bank that it will continue to provide sufficient liquidity to the banking system. Some traders also expect the RBI to announce a relaxation in liquidity coverage ratio norms, they said. (Kabir Sharma)

 

End

 

 

Edited by Saji George Titus

 

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