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Informist, Thursday, Mar. 12, 2026

By Cassandra Carvalho

MUMBAI – The one-day interbank call money rate ended below the Reserve Bank of India's Standing Deposit Facility rate again on Thursday even as outflows for advance tax payments on income tax and corporation tax likely began, since the RBI has infused ample liquidity in the banking system, dealers said. However, even with an INR-500-billion open market operation auction scheduled Friday, the RBI's liquidity infusions are unlikely to suffice amid several outflows and traders expect more liquidity management operations to be conducted next week, dealers said. 

"Around INR 100 billion to INR 200 billion payments would've been made today (Thursday), but most of it is tomorrow (Friday)," a dealer at a private sector bank said. "Mutual funds saw some redemptions today and they have some tomorrow in liquid funds, from banks, etc who will need the money to make the tax payments."

The one-day call rate ended at 4.70%, against 4.75% Wednesday. The weighted average call rate was 5.07% Thursday, against 5.08% the previous day. The weighted average rate in the tri-party repo market was 4.79%, from 4.80% Wednesday. Dealers expect around INR 1.5 trillion in outflows for advance tax payments on income tax and corporation tax, for which the deadline is Sunday. Sunday is also the last day of the fortnight, wherein banks have to maintain enough cash balances for reporting requirements. 

Even with INR 1.00 trillion of liquidity infusions through OMO auctions scheduled this week, traders expect more liquidity to be pumped by the RBI next week, with some expecting a variable rate repo auction of a tenure that will extend into the new financial year starting April, dealers said. Nearing the end of the March quarter, primary dealerships are borrowing in the term-money segment for a tenure that extends beyond Mar. 31, they said. 

"We require the term-borrowing for our non-SLR management, and lenders are very less, it's an uncollateralised market," a trader at a primary dealership said. "RBI is constantly taking feedback from us and we have said this to them." A dealer from another primary dealership said that term borrowing costs jumped by 100 basis points for a tenure that crosses a quarter-end, compared to normal term-borrowing, as banks refuse to lend for such a long period due to risk management and compliance.

Further, the central bank's intervention in the foreign exchange spot market is draining rupee liquidity, which will warrant further liquidity infusion from the central bank, dealers said. The RBI sold around $2.5 billion in the rupee spot and forwards market Thursday, a dealer at a private sector bank estimated, a day the rupee hit a record low of 92.36. Traders in the foreign exchange market expect the RBI to conduct a dollar-rupee buy-sell swap auction. 

OUTLOOK

The three-day call money rate is seen between the Standing Deposit Facility rate and repo rate Friday, nearing the end of the fortnight and as payments for advance tax on income tax and corporation tax put upward pressure on rates. However, liquidity is still in a comfortable surplus, limiting a rise in rates, dealers said. Traders will also track the result of the INR-500-billion open market operation auction scheduled Friday. Further, the RBI is seen purchasing gilts on-screen this week, which may also support liquidity, dealers said. Dealers see the call rate at 4.75-5.25% Friday. 

Dealers expect the RBI to announce measures to infuse liquidity in the banking system for next week, including a variable rate repo operation of a tenure that could extend into the new financial year starting April, dealers said. Dealers in the foreign exchange market expect the RBI to announce a $10-billion, dollar-rupee buy-sell swap auction, Informist reported Thursday. 

CALL RATE

4.70%--Thursday's close for one-day loans

5.15%--Thursday's open for one-day loans

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

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Up on early demand for funds; seen dn on comfortable liquidity

MUMBAI – The one-day interbank call money rate rose Thursday due to demand for funds in early trade, dealers said. This led to the call rate to rise above the Reserve Bank of India's Standing Deposit Facility rate of 5.00%. Dealers expect the call rate to fall below the SDF rate later during the day, which is the usual case, as early demand for funds eases.   

"PDs (primary dealerships) usually borrow in call early, mainly for daily business operations. But when there is any auction then the (call) rate will be slightly higher," a dealer at a state-owned bank said. "Market is comfortable with liquidity and we also have OMO tomorrow (Friday), so rates will be on lower side (in tri-party repo market and call market)," the dealer said. 

At 0943 IST, the one-day interbank call rate was at 5.13%, up from 4.75% Wednesday. The weighted average call rate was at 5.13%, also higher than the average of 5.08% Wednesday. The weighted average rate in the tri-party repo market was 4.82%, up from 4.80% Wednesday. 

Although liquidity fell slightly Wednesday the call rate continued to be below the RBI's repo rate of 5.25% as the market is comfortable with the current liquidity surplus. The call rate is expected to decline as the day progresses due to ample liquidity in the banking system. The weighted-average call rate is likely to be around 5.10% Thursday. Dealers see the call rate at 4.75-5.20% and the tri-party repo rate at 4.50-5.00% Thursday. 

The net liquidity absorbed by the RBI from the banking system was INR 2.40 trillion Wednesday, down from INR 2.74 trillion Tuesday. The liquidity surplus was down Wednesday due to outflows of INR 469.60 billion for payments on state bounds auctioned Tuesday.

Liquidity is expected to stay comfortable as the central bank had earlier announced open market operations auction to buy INR 1 trillion of bonds, dealers said. There were inflows of INR 500 billion through the first tranche of the auction Tuesday and inflows of the second tranche will be Monday. 

"We are expecting March end system liquidity surplus to be 50 thousand (crores) to 1 lakh (crores) (INR 500 billion to INR 1 trillion)," a dealer at a private bank said. The dealer expects the system liquidity surplus to be 0.5-1% of the net demand time liability for March end and later rise above 1% in April.

On Thursday, there will be outflows of INR 375 billion for payments for treasury bills auctioned and inflows of around INR 413 billion from redemptions of treasury bills and coupon payments on state government bonds. (J. Navya Sruthi)

End

US$1 = INR 92.19

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

Edited by Avishek Dutta

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