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Informist, Wednesday, Feb. 11, 2026

By Aaryan Khanna

MUMBAI – The interbank call money rate ended below the Reserve Bank of India's Standing Deposit Facility rate for the fifth straight session Wednesday due to comfortable liquidity surplus in the banking system. Bank traders borrowed money from the interbank markets to park at the SDF window at 5.00% when rates were lower than the bottom of the Liquidity Adjustment Facility Corridor, dealers said.

The one-day call rate ended at 4.65%, against 4.45% Tuesday. The weighted average call rate was 5.03% Wednesday, similar to 5.02% the previous day. The weighted average rate in the broader tri-party repo market rose to 4.66% from 4.40% Tuesday, up sharply for the second straight session. The latter market includes mutual funds, who do not have access to the SDF window and have been lending cash in the tri-party repo rate below 5.00%.

"Where arbitrage is available, banks will use it," a dealer at a private-sector bank said. "I think a worse sign for the market is that all the liquidity that can come in is being parked at the SDF (window) and none of it is being used for CP-CDs (commercial paper and certificates of deposit)." Indicative rates on three-month CDs fell to 7.04-7.05% from 7.09% Tuesday while that on three-month CP issued by non-banking finance companies fell to 7.55-7.60%, but remained sharply up from December despite the liquidity surplus.

According to latest data, the net liquidity absorbed from the banking system by the RBI -- a proxy for the liquidity surplus -- rose to INR 3.37 trillion Tuesday from INR 3.11 trillion Monday. Dealers said liquidity rose on Tuesday on account of redemption of state government securities but likely fell Wednesday due to the payment of INR 476.20 billion for the state bond auction conducted Tuesday. On average, the daily liquidity surplus has averaged around 1% of banks' net demand and time liabilities in February.

OUTLOOK

On Thursday, the one-day call money rate may open below the repo rate of 5.25% due to low demand for funds amid the surplus liquidity in the banking system. During the day, the call money rate is expected to move in a range of 4.25-5.15%. Rates are seen inching up by Friday as banks look to meet cash reserve requirements at the end of the reporting fortnight, dealers said.

CALL RATE

4.65%--Wednesday's close for one-day loans

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

4.45%--Tuesday's close for one-day loans

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Near RBI's SDF rate on comfortable systemic liquidity surplus

MUMBAI – The interbank call money rate was near the Reserve Bank of India's Standing Deposit Facility rate of 5% due to comfortable systemic liquidity surplus, dealers said. However, call rates may rise later in the day as banks are expected to take advantage of the spread between the low triparty repo rates and parking funds in the Standing Deposit Facility, dealers said. 

"We might see some pressure on rates as a section of the market is borrowing from treps and parking in SDF," a dealer at state-owned bank said. "There is more than needed liqudity in the system, so don't expect rates to even touch repo," he said. 

At 1003 IST, the one-day call rate was at 5.05%, up from Tuesday's close of 4.45%. The weighted average call rate was also 5.09%, compared to 5.02% on Tuesday. The weighted average rate in the wider tri-party repo market, which includes mutual funds, was 4.60%, against 4.40% the previous trading day. 

According to latest data, the net liquidity absorbed from the banking system by the RBI – a proxy for the liquidity surplus – rose to INR 3.37 trillion Tuesday from INR 3.11 trillion Monday. Dealers said liquidity rose on Tuesday on account of redemption of state development bonds. State bonds worth INR 185.25 billion were redeemed on Tuesday.  

Dealers see call and tri-party repo market rates lower during the day and in a range similar to Tuesday due to lack of major outflows and inflows. However, some traders may look to take advantage of the spread between triparty repo and Standard Deposit Facility rates, which may exert pressure on overall rates in the market, dealers said. "Mutual funds have cash, so people are using that to get funds below SDF rate. Looks like corporate flow into mutual fund may have come," a dealer with another state-owned bank said.  (Kabir Sharma)

End

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

Edited by Ashish Shirke

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