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Informist, Friday, Mar. 13, 2026

By J. Navya Sruthi

NEW DELHI – The interbank call money rate Friday ended sharply up and above the Reserve Bank of India's Standing Deposit Facility due to firm demand for funds on account of advance tax payments for income tax and corporation tax, dealers said. Funds to meet requirements for the reporting fortnight and three-day loans also kept the call rate above the SDF rate. These factors led to a sharp rise in the tri-party repo rate during the day.

The three-day call rate ended at 5.15%, sharply up from 4.70% Thursday. This was the highest closing level since Jan. 29. The tri-party repo rate had surged to 5.40% earlier in the day, also the highest since Jan. 29. The weighted average call rate was 5.10%, up from 5.07% Thursday. The weighted average rate in the tri-party repo market was 5.04%, up from 4.79% Thursday. 

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, by which banks have to maintain enough cash balances for reporting requirements. 

"Today (Friday) being the last reporting day in this fortnight and tax outflows are going on, so there is demand for funds. That's why mutual funds are taking advantage of it and are lending at a higher rate," a dealer at a state-owned bank said. "(Around) 20-30 thousand crores (INR 200 billion to INR 300 billion) has been traded in the 5.20-5.30% range in TREPs market."

According to latest data, cash balances of banks with the RBI were INR 7.41 trillion Thursday, down from INR 7.44 trillion Wednesday. The daily average requirement for the fortnight ending Sunday is INR 7.64 trillion.

"Banks were seen borrowing under the pressure of advance tax outflows, and they also have extra cushion build-up to maintain cash balances as Saturday and Sunday are holidays and the fortnight end is on Sunday," a dealer at a major state-owned bank said. Market participants expect around INR 1.5 trillion outflows for advance tax payments for income tax and corporation tax.

Most dealers expect the RBI to conduct a variable rate repo auction of INR 500 billion or INR 750 billion next week to support the banking system's liquidity ahead of outflows for goods and services tax payments scheduled around Mar. 20. Dealers expect outflows of around INR 1.8 trillion for GST payments next week.

"We have GST (goods and services tax payments) outflows around Mar. 20 so we need a VRR next week," the dealer at the major state-owned bank said. "It will be a seven-day VRR (auction) for more," the dealer said.

Dealers in the foreign exchange market expect the RBI to announce a $10-billion, dollar-rupee buy-sell swap auction, Informist reported Thursday.

OUTLOOK

On Monday, the one-day call money rate is likely to open around 5.20%, near the RBI's repo rate of 5.25% due to low liquidity surplus in the system after payments for advance tax for income tax and corporation tax. But inflows of INR 500 billion through the second tranche of open market operations auction Friday will keep the call rate below the repo rate.

CALL RATE

5.15%--Friday close for three-day loans

5.15%--Friday open for three-day loans

4.70%--Thursday close for one-day loans

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Below RBI's repo rate; early demand met with liquidity surplus

NEW DELHI – The interbank call money market rate was below the Reserve Bank of India's repo rate as the early demand for funds from primary dealerships and banks was met from the comfortable banking system liquidity surplus, dealers said. Outflows on account of advance tax payments to the government may put pressure on rates during the day, they said.

At 0935 IST, the three-day call rate was at 5.15%, up from 4.70% for one-day loans Thursday. The weighted average call rate was at 5.14%, also higher than the average of 5.07% on Thursday. The weighted average rate in the tri-party repo market – which includes mutual funds – was 4.84%, up from 4.79% Thursday. 

The net liquidity absorbed by the RBI from the banking system – a proxy for systemic liquidity surplus – was INR 2.49 trillion Thursday, slightly higher than INR 2.40 trillion Wednesday. The slight rise was likely due to the RBI's interventions in the foreign exchange and government bond markets, dealers said. The central bank was neutralising the impact of its dollar sales in the spot market to prevent a record low in the rupee by buying gilts and receiving dollar-rupee buy-sell swaps, they said.

Advance tax outflows are expected to drain around INR 1.5 trillion Friday with around INR 200 billion already having gone out of the system since Wednesday on this account, dealers said. Meanwhile, banks must park funds with the RBI to meet cash reserve ratio requirements as on Mar. 15, and will keep a buffer to meet cash needs during the weekend. 

"Rates could be on the higher side later since there are advance taxes today and then the reporting fortnight needs also, so we'll have to maintain a higher buffer," a dealer at a state-owned bank said. "It should not go beyond repo rate since liquidity is already there and the RBI's OMO will also improve liquidity by Monday." The RBI is conducting an INR 500-billion open market operation auction Friday that will settle Monday. 

The market remains divided on expectations of further liquidity measures from the RBI. Some sections expect the central bank to infuse rupee liquidity through further OMOs, an up to $10 billion dollar-rupee buy-sell swap auction, or variable rate repo auctions of up to INR 750 billion, dealers said. In addition to the liquidity drain for advance tax, goods and services tax payments will also draw out nearly INR 2 trillion from the banking system next week, they said. (Aaryan Khanna)

End

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

With inputs from Durgesh Nandan

Edited by Ashish Shirke

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