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Informist, Wednesday, Mar. 4, 2026

By J. Navya Sruthi

MUMBAI – The one—day interbank call money rate ended below the Reserve Bank of India's Standing Deposit Facility rate of 5.00% Wednesday due to ample liquidity surplus in the banking system, dealers said. The one-day call rate was near the RBI's repo rate of 5.25% during the first half of the session on demand from primary dealerships, but later fell below the SDF rate.

The one-day call rate ended at 4.85%, up from 4.75% Monday for two-day loans. The weighted average rate rose to 5.11% from 5.09% Monday. The weighted average rate in the broader tri-party repo market, which includes mutual funds, was 4.85%, slightly down from 4.87% Monday. 

"More demand was there from PDs (primary dealerships) today (Wednesday) as they are borrowing here, because they expect rates to rise from next week," a dealer at a state-owned bank said. A dealer at a small finance bank said that there were a few banks with a lower liquidity coverage ratio borrowing in the call market Wednesday. "Those who don't want their SLR (statutory liquidity ratio) to take a hit, they are seen borrowing here (in the call market)," the dealer at the small finance bank said.

However, other dealers said there was no significant increase in volume to substantiate that banks borrowed from call money to meet their credit requirements, as they were unable to sell gilts due to their liquidity coverage ratio needs. According to the latest data, volume in the call money market was INR 109.66 billion Wednesday, up from INR 91.86 billion Monday.  

According to the latest data, the net liquidity absorbed by the RBI from the banking system - a proxy for the liquidity surplus - was INR 2.72 trillion Tuesday, up from INR 2.65 trillion Monday. The banking system's liquidity improved following month-end inflows Monday and banks' lower cash balances with the RBI, dealers said. Cash balances of banks with the RBI as of Tuesday were INR 8.08 trillion, down from INR 8.19 trillion Monday, against the requirement of INR 7.64 trillion for the fortnight ending Mar. 15.

Dealers expect the call rate and tri-party repo rate to inch up by 5 to 10 basis points next week, amid outflows for excise duty payments. They also expect the rate to rise above the RBI's repo rate of 5.25% in the second fortnight of March, when outflows for payments of goods and services tax and advance tax for income tax and corporation tax usually take place.

A dealer at a state-owned bank said the RBI called the bank Monday to seek its opinion on whether the market needs any liquidity measures, such as an open market operations auction or a longer-term variable rate repo auction. Most dealers in the market expect the central bank to announce such a measure around Mar. 14, when rates are expected to rise due to outflows for tax payments.   

OUTLOOK

Thursday, the one-day call is likely to open around 5.15%, below the RBI's repo rate of 5.25%, due to the liquidity surplus in the banking system following month-end inflows. Dealers expect the call money rate to move in a range of 4.50-5.20% Thursday, with the weighted average rate around 5.11%, similar to Wednesday, as no major outflows other than payment of INR 361 billion for the treasury bill auction are scheduled for the day. 

CALL RATE

4.85%--Wednesday's close for one-day loans

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

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

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Below RBI's repo rate on ample systemic liquidity surplus

MUMBAI – The interbank call money rate was below the Reserve Bank of India's repo rate of 5.25% due to ample liquidity surplus in the banking system, dealers said. At 0929 IST, the one-day call rate was at 5.15%, up from Monday's close of 4.75% for two-day loans. Money markets were shut Tuesday on account of Holi.   

"If we see, only one deal of 25 crores (INR 250 million) happened at 5.20%. After that, (call) rate has fallen to 5.18%," a dealer at a private sector bank said. "Rates in TREPS (tri-party repo) market opened in line with expectations. So, during the day (call) rate will taper to 5.10% and (further) below once demand (for funds) has been met," the dealer said.     

The tri-party repo rate opened at 4.85%, which is the lowest since Thursday. The weighted average rate in the wider tri-party repo market, which includes mutual funds, was 4.90%, up from 4.87% the previous day. The weighted average call rate was 5.18%, compared with 5.09% Monday.  

According to the latest data, the net liquidity absorbed from the banking system by the RBI -- a proxy for the liquidity surplus -- was INR 2.65 trillion Monday, up from INR 2.13 trillion Sunday. Inflows from the government's spending on salaries and pensions along with coupons on state bonds have boosted the system's liquidity surplus, dealers said.

A dealer at a state-owned bank said that most of the banks in northern India are shut Wednesday on account of Holi, which will also keep rates lower during the day. Dealers expect the call rate to trade at 4.75-5.25% and the weighted average call rate around 5.20%. 

Dealers expect the call rate and tri-party repo rate to inch up by five to 10 basis points next week when there are outflows for excise duty payments. They also expect the rate to rise above the RBI's repo rate of 5.25% in the second fortnight of March, when outflows for payments of goods and services tax and advance tax usually take place. "We will see more redemption pressure later this month and more institutions will be taking out money," the dealer at the private sector bank said.  End

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

Edited by Saji George Titus

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