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Informist, Tuesday, Feb. 24, 2026

By Aaryan Khanna

NEW DELHI – The interbank call money rate ended below the Reserve Bank of India's Standing Deposit Facility rate of 5.00% as market participants met their demand for funds in the first half of the day, dealers said. The comfortable surplus liquidity in the banking system even after goods and services tax outflows between Friday and Monday kept the call money rate largely below the repo rate of 5.25%. Traders expect month-end spending from the government to further pull down money market rates by the end of the week.

The one-day call rate ended at 4.75%, up from Monday's close of 4.60%. The weighted average call rate was at 5.10%, similar to 5.11% Monday. The weighted average rate in the broader tri-party repo market, which includes mutual funds, was at 4.89% Tuesday, slightly lower than 4.93% Monday.

According to latest data, the net liquidity absorbed from the banking system by the RBI--a proxy for the liquidity surplus--was INR 1.93 trillion Monday, up from INR 1.74 trillion Sunday. Dealers attributed the rise to a drawdown in cash balances, which traders had expected earlier, with some sections of the market also speculating modest government spending.

Meanwhile, cash balances with the RBI on Monday were INR 7.43 trillion, down from INR 7.79 trillion Sunday. Dealers expect banks to keep their cash balances lower than the the average daily requirement of INR 7.66 trillion for the fortnight ending Saturday as they had maintained excess liquidity for cash reserve ratio reporting last week.

"After the outflows for GST, there has not been any significant movement in liquidity. Things are relatively comfortable," a dealer at a private-sector bank said. "The trades at 5.50% would only be happening due to a bilateral agreements--funds are easily available at 5.20% in the call market and 4.95% in TREPS (triparty repo)." The one-day call money rate hit a high of 5.50% for the second day Tuesday.

OUTLOOK

On Wednesday, the one-day call may open below the RBI's repo rate of 5.25% due to comfortable liquidity surplus in the banking system despite outflows for GST payments. During the day, the call money rate is expected to move in a range of 4.80-5.50%. No major inflows or outflows are expected Wednesday, with the government's spending expected to add to banking system liquidity by Friday, dealers said.

CALL RATE

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

5.20%--Tuesday's open for one-day loans

4.60%--Monday's close for one-day loans

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Near RBI's repo rate on early demand from primary dealerships

MUMBAI – The interbank call money rate was near the Reserve Bank of India's repo rate of 5.25% Tuesday due to early demand for funds from primary dealerships, dealers said. They expect the call rate to fall near the central bank's Standing Deposit Facility rate of 5.00% once demand for the day is met.

At 0940 IST, the one-day call rate was 5.15%, up from Monday's close of 4.60%. The weighted average call rate was 5.19%, compared with 5.11% Monday. The weighted average rate in the wider tri-party repo market, which includes mutual funds, was 4.95%, also near the RBI's SDF rate of 5.00%, against 4.93% the previous day. The one-day interbank call money rate Tuesday opened at 5.20% and the overnight rate opened at 4.92%, both at the highest levels since Feb. 2.

"Market was expecting liquidity to fall on Monday because of GST outflows. So, TREPS (tri-party repo rate) opened slightly higher and same was followed with call," a dealer at a state-owned bank said. "But then yesterday's (Monday) liquidity increased, could be because of government expenditure," the dealer said.

According to latest data, the net liquidity absorbed from the banking system by the RBI -- a proxy for the liquidity surplus -- was INR 1.93 trillion Monday, up from INR 1.74 trillion Sunday. Meanwhile, cash balances with the RBI on Monday were INR 7.43 trillion, down from INR 7.79 trillion Sunday, against the average daily requirement of INR 7.66 trillion for the fortnight ending Saturday.

Dealers attribute the decline in cash balances to outflows for gilt auction payments. On Monday, there was an outflow of INR 330 billion from the banking system for gilt auction payments and an outflow of INR 13.45 billion for coupon payment on state bonds.

The market does not expect the RBI to announce a variable rate reverse repo auction as it is comfortable with the current call and overnight rates. "VRRR is not at all on the card, RBI is happy with the current rates, and we can see outflows for advance tax payments from March second week (hence rates will rise then)," a dealer at a state-owned bank said. 

Dealers also do not expect any variable rate repo auction as liquidity still remains near the INR 2-trillion level. "We were expecting it (liquidity) to fall to INR 1 trillion or below, but that is not the case. So there is no need for a VRR now and liquidity will eventually rise to the INR 3 trillion mark again once government's month-end inflows start," a dealer at a private bank said.  (J. Navya Sruthi)

End

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

Edited by Akul Nishant Akhoury

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