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Informist, Monday, Mar. 9, 2026

By J. Navya Sruthi

MUMBAI – The one-day interbank call rate ended near the Reserve Bank of India's Standing Deposit Facility rate of 5.00% due to comfortable liquidity in the banking system, dealers said. They expect the central bank to announce a variable rate repo auction this week because of scheduled outflows around Mar. 15 for advance tax payments for income tax and corporation tax.   

The one-day call rate ended at 5.07%, up from 4.75% for two-day loans Saturday. The weighted average rate was at 5.07%, up from 4.76% Saturday. The tri-party repo rate ended at 5.15%, the highest close since Jan. 29, but the weighted average rate in the broader market, which includes mutual funds, was lower at 4.86%, from 4.90% Saturday. The last trade, which happened at 5.15% and was for INR 66.5 million in the tri-party repo market. 

According to the latest data, the net liquidity absorbed by the RBI from the banking system - a proxy for the liquidity surplus - was INR 2.41 trillion Sunday, down from INR 2.47 trillion Saturday and INR 2.91 trillion Friday. Liquidity surplus fell Saturday due to outflows for payment of excise duty and tax deducted at source, dealers said.  

Despite these outflows, the call rate and the tri-party repo rate were below the RBI's repo rate of 5.25% due to the central bank's first tranche of open market operations auction for INR 500 billion Monday. Inflows of this auction will be reflected in Tuesday's liquidity figure. The RBI will conduct the second tranche of the OMO auction Friday for INR 500 billion.   

Commenting on higher borrowing volume for more than one day, a dealer at a major state-owned bank said: "PDs are borrowing here currently because of year-end requirements." The volume in the 30-day call was INR 4 billion, up from INR 250 million seen of Jan. 21, according to data from the NSE Cogencis WorkStation. Volume in the 29-day call was INR 2.2 billion, up from INR 10 million.       

A dealer at a small finance bank expects that the central bank will announce a six- or seven-day VRR for INR 500 billion before outflows for payments of advance tax for income tax and corporation tax, which usually take place around Mar. 15. Dealers expect around INR 1.5 trillion outflows for this tax payment.

"Right now longer-end is steepening because market sentiment is weak (because of military conflict in West Asia)," the dealer at the state-owned bank said. "So there is no point of OMO, of course, it will improve durable liquidity, but nobody wants to tender securities as it is year-end now. I think RBI will get a VRR now as we already had enough OMOs this year," the dealer said. 

Another dealer at a primary dealership said the RBI will not announce another OMO auction if the yield on the 10-year benchmark bond falls to 6.69% from Monday's close of 6.72%. "After the rally in crude prices, yields should actually be above 6.80%. But domestic factors limited it (the yield) at current levels," the dealer said. 

"RBI should get it (VRR) before advance tax outflows start," the dealer at the major state-owned bank said. "If it waits till payment is made, then there will not be much impact of rates and maximum downside we can expect is repo (rate). But if it (OMO) happens before advance tax, then rate will be between SDF (rate) and repo (rate)," the dealer said.    

OUTLOOK

Tuesday, the one-day call rate is likely to open at a similar rate seen on Monday due to ample liquidity in the banking system. Dealers see the call rate at 5.15-5.20% Tuesday, and they expect it to fall below the RBI's SDF rate of 5.00% during the day due to inflows of INR 500 billion from open market operations auction Monday.

CALL RATE

5.07%--Monday close for one-day loans

5.15%--Monday open for one-day loans

4.75%--Saturday 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 liquidity, OMO announcement

MUMBAI – The one-day interbank call rate was below the Reserve Bank of India's repo rate of 5.25% due to ample liquidity surplus in the banking system despite outflows for excise duty and tax deducted at source. Dealers said the central bank's announcement of open market operations auction of INR 1 trillion Friday is also keeping rates lower.  

At 0929 IST, the one-day call rate was 5.15%, up from 4.75% Saturday for two-day loans. The weighted average call rate was also 5.15%, up from 4.76% the previous day. The weighted average rate in the broader tri-party repo market, which includes mutual funds, was 4.83%, slightly down from 4.90% 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 2.91 trillion Friday, slightly down from INR 3.02 trillion Thursday. Cash balances of banks with the RBI as of Friday were INR 7.68 trillion, unchanged from the previous day. 

However, these were higher than the reserve requirement of INR 7.64 trillion for the fortnight to Mar. 15.

Dealers said there were some outflows for excise duty and tax deducted at source payments Saturday, but majority of outflows will be seen Monday. Market participants expect INR 500 billion-INR 600 billion outflows for these tax payments. 

The RBI announced on Friday that it would buy INR 1 trillion of gilts through open market operation auctions in two tranches of INR 500 billion each this week, the first on Monday and the second on Friday.  

"There will not be major impact on rates now because of liquidity surplus and inflows from OMO this week. Rates will be rangebound this week," a dealer at a small finance bank said. "I expect major impact only around Mar. 15, we will see some (impact) from Friday, before advance tax payments start," the dealer said.   

Dealers also said there will not be any impact on rates in the call market and the tri-party repo market due to the military conflict in West Asia. A dealer at a state-owned bank said volume in the tri-party repo market is likely to increase during the second half of the day due to selling by mutual funds in fixed income and equities market. 

The near-month Brent crude oil futures surged to a nearly four-year high after Israel bombed some of Iran's oil storage facilities over the weekend in an escalation of the war in West Asia. The rupee fell to a record low of 92.31 a dollar and the benchmark government bond was at INR 97.96, down 0.6% from the previous day's close. (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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