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Informist, Tuesday, Mar. 17, 2026

By Aaryan Khanna, Durgesh Nandan, and Shumaila Firoz

NEW DELHI – The one-day call money rate ended above the Reserve Bank of India's repo rate of 5.25% for the second straight day after advance tax outflows brought down surplus liquidity in the banking system to a near seven-week low, dealers said. Early demand for funds cooled after the RBI's variable rate repo auction, with the lack of fresh outflows Tuesday keeping the triparty repo rate close to the Standing Deposit Facility rate of 5.00%.

The one-day call rate ended at 5.30%, similar to 5.31% Monday. The weighted average call rate was 5.28%, easing from 5.31% Monday. The weighted average rate in the tri-party repo market was 5.04%, down sharply from 5.18% Monday.  

The net liquidity absorbed by the RBI from the banking system--a proxy for systemic liquidity surplus--was INR 754.84 billion Monday, down from INR 2.08 trillion Sunday. This was the lowest liquidity surplus since Jan. 28 and came after outflows from advance tax payments for individuals and businesses in March drained around INR 1.5 trillion from the banking system by Monday, dealers said.

Traders do not expect the RBI to conduct any further measures to infuse durable liquidity in March, though it may conduct more variable rate repo operations before the end of the month to help bank's meet short-term cash mismatches at the year end, dealers said. The central bank got bids worth only INR 480.14 billion at the INR-1.50-trillion seven-day VRR auction. It accepted all bids at a cut-off yield of 5.26%.

"I can borrow from TREPS (triparty repo) at a cheaper rate so there was no big demand for VRR. The money market rates will remain reasonable until Friday, most likely," a dealer at a state-owned bank said. "Plus, the quarter-end is coming and the RBI usually gives decent amount of liquidity around this time. More auctions will be there if the (call money) rates go up."

Trading volumes in the call money market have shot up over the past three sessions amid the advance tax outflows, with Cogencis data showing the volumes Tuesday were the most since March 2019. Some traders were also worried that the Ramzan Id-ul-Fitr holiday, scheduled for Saturday, may be rescheduled to Friday, dealers said.

OUTLOOK

On Wednesday, the two-day call money rate is likely to open near the RBI's repo rate of 5.25% as the liquidity surplus in the banking system has fallen after payments for advance tax. Money markets are shut on Thursday for Gudi Padwa. The call money rate is seen in a range of 4.75-5.40% through the day.

More liquidity infusion measures are expected to ease money market rates near the quarter- and financial year-end in March, dealers said. Traders expect another VRR auction after the poor subscription at the seven-day liquidity infusion Tuesday.

CALL RATE

5.30%--Tuesday's close for one-day loans

5.30%--Tuesday's open for one-day loans

5.31%--Monday's close for one-day loans

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Above repo despite VRR as liquidity surplus lowest in 7 weeks

MUMBAI – The one-day interbank call money market rate was above the Reserve Bank of India's repo rate Tuesday even as the Reserve Bank of India conducted a variable rate repo auction of INR 1.50 trillion, as the systemic liquidity surplus fell to its lowest since Jan. 28, after outflows of around INR 1.5 trillion for advance tax payments, and upcoming outflows for goods and services tax payments, dealers said. However, rates in the triparty repo market were below the repo rate, and traders preferred to borrow at there instead of rates above repo at the VRR, dealers said.  

At 1032 IST, the one-day call rate was 5.34%, up from 5.31% for one-day loans Monday. The weighted average call rate was 5.34%, up from 5.31% Monday. The weighted average rate in the tri-party repo market – which includes mutual funds – was 5.15%, against 5.18% Monday. The net liquidity absorbed by the RBI from the banking system – a proxy for systemic liquidity surplus – was INR 754.84 billion Monday, down from INR 2.08 trillion Sunday. 

The INR-1.5-trillion VRR of seven-day tenure was poorly subscribed with the RBI accepting all bids worth INR 480.14 billion. Primary dealerships were the major participants, dealers said. There are no major outflows expected from the banking system Tuesday. However, demand for funds is high after around INR 1.5 trillion of outflows for advance tax payments between Friday and Monday, and upcoming outflows of INR 1.8 trillion for goods and services tax payments by end of the week, dealers said. Even as the VRR Tuesday was poorly subscribed, traders expect another VRR for next week. Some also expect a measure to infuse durable liquidity into the banking system, such as an open market operations auction.    

"RBI has to manage liquidity. Suddenly 2.5 lakh crore (INR 2.5 trillion) liquidity squeeze is there," a dealer at a private sector bank said. "But TREPS is coming down. If they (dealers) can borrow here (in TREPS) only, then why to borrow at VRR higher rate for one-week?"  (Cassandra Carvalho, Shumaila Firoz and Durgesh Nandan)  End

US$1 = INR 92.37

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

Edited by Akul Nishant Akhoury

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