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Informist, Thursday, Mar. 5, 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% Thursday due to ample liquidity surplus in the banking system and the lack of any major outflows during the day, dealers said. They also said likely bond purchases by the RBI have led to liquidity inflows keeping the call rate below the RBI's SDF rate almost the entire day.

 

The one-day call rate ended at 4.85% for the second day in a row. The weighted average rate was also down at 5.06% from 5.11% Wednesday. The weighted average rate in the broader tri-party repo market, which includes mutual funds, was also lower at 4.79%, from 4.85% Wednesday. 

 

"Leaving the current liquidity surplus (in the banking system) which already kept rates lower, there were also RBI's OMO (open market operations) purchases which added more liquidity," a dealer at a primary dealership said. 

 

Liquidity surplus in the banking system and cash reserves with the RBI were slightly lower Wednesday due to INR 443.3 billion outflows for payments on account of the state bonds auctioned 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 2.67 trillion Wednesday, slightly down from INR 2.72 trillion Tuesday. Cash balances of banks with the RBI were INR 7.92 trillion Wednesday, down from INR 8.08 trillion Tuesday. However, these were higher than the reserve requirement of INR 7.64 trillion for the fortnight to Mar. 15.

 

Dealers said Friday the call money rate is likely to open near the RBI's repo rate of 5.25% on borrowing requirement for three days and payments for excise duty and tax deducted at source, which are due Saturday. They expect INR 500 billion-INR 600 billion outflows on account of the tax. Rates in both the call money market and the tri-party repo market are expected to rise around five basis points next week after these outflows, dealers said.    

 

Dealers expect the RBI to announce liquidity measures such as an open market operations auction or a variable rate repo auction by the end of next week. Outflows for payments of goods and services tax and advance tax for income tax and corporation tax usually take place from Mar. 16 and lead to a spike in the call and tri-party repo rates. Dealers expect INR 3 trillion to INR 3.5 trillion of outflows during the second fortnight of the month. Of these, around INR 1.5 trillion will be towards advance tax and INR 1.7 trillion for GST payments.

 

Most market participants expect the central bank to announce an open market operations auction, while a few expect it to announce a variable rate repo auction instead of an OMO auction as banks' liquidity coverage ratio is low.

 

"I don't know how much SLR is left with banks for RBI to announce another OMO. Most probably it will announce a March-crossing VRR as most banks will borrow then," a dealer at a state-owned bank said. The central bank will likely announce a VRR despite the lower call money rate, the dealer said. "RBI would have brought a VRRR (variable rate reverse repo auction) because of lower rates. The fact that it did not bring one, shows its intent to keep rates lower," the dealer said. 

 

Dealers also expect inflows from the government's expenditure during the month. "Inflows of at least 70–80% of the government's cash balances can be seen this month, but that doesn't mean there will not be other liquidity measures by RBI," the dealer at the primary dealership said.  

 

OUTLOOK

Friday, the three-day call is likely to open near the RBI's repo rate of 5.25% on borrowing requirements for three days and due to outflows on account of excise duty and tax deducted at source payment that are due Saturday. However, the call rate is likely to fall during the day due to the liquidity surplus in the banking system. Dealers expect the call money rate to move in a range of 4.50-5.25% Friday. 

 

CALL RATE

4.85%--Thursday close for one-day loans

5.15%--Thursday open for one-day loans

4.85%--Wednesday close for one-day loans

 

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	THURSDAY	WEDNESDAY
Overnight	5.13	5.16
3-day	--	--
14-day	5.80	5.81
1-month	6.00	6.01
3-month	6.79	6.78

---

India Call: Below RBI's repo rate on comfortable banking system liquidity

 

MUMBAI – The one-day interbank call money rate was below the Reserve Bank of India's repo rate of 5.25% Thursday due to ample liquidity surplus in the banking system, dealers said. At 0947 IST, the one-day call rate was 5.15%, up from 4.85% Wednesday. The weighted average call rate was also 5.15%, up from 5.11% the previous day.  

 

According to the latest data, the net liquidity absorbed by the RBI from the banking system - a proxy for the liquidity surplus - was INR 2.67 trillion Wednesday, slightly down from INR 2.72 trillion Tuesday. Although liquidity fell due to payment of INR 443.3 billion for the state bond auction, the outflow was offset by a decline in cash balances maintained with the central bank. Cash balances of banks with the RBI as of Wednesday were INR 7.92 trillion, down from INR 8.08 trillion Tuesday, against the requirement of INR 7.64 trillion for the fortnight ending Mar. 15.

 

Dealers expect the call rate to fall near the RBI's Standing Deposit Facility rate of 5.00% during the day once the demand by primary dealerships has been met. The call rate opened at 5.15% Thursday, slightly lower than 5.20% Wednesday. The weighted average rate in the broader tri-party repo market, which includes mutual funds, was 4.88%, slightly up from 4.85% Wednesday.  

 

"Yesterday (Wednesday), certain banks were borrowing to maintain their forward swap position for the day. Now that the RBI has intervened, rupee is better and call rate is also lower," a dealer at a state-owned bank said. So far in the current session, the call rate has already fallen to 5.10%.   

On Thursday, the rupee appreciated to 91.5775 a dollar from 92.1500 Wednesday. The domestic currency surged as banks sold dollars on behalf of the central bank in the offshore non-deliverable forwards market before the spot market opened. (J. Navya Sruthi)

 

End

 

 

 

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

 

Edited by Deepshikha Bhardwaj

 

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