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Informist, Friday, Mar. 20, 2026

By Durgesh Nandan and Aaryan Khanna

MUMBAI/NEW DELHI – The three-day call money rate ended above the Reserve Bank of India's repo rate of 5.25% for the fourth straight session due to outflows for goods and services tax payments. Banks also borrowed funds amid low liquidity surplus in the banking system Thursday, with the call money market shut on Saturday for Ramzan Id-ul-Fitr, dealers said.

The three-day call rate ended at 5.35%, down from 5.40% for two-day loans Wednesday. However, the weighted average rate was at 5.34%, higher from 5.29% Wednesday. The tri-party market's weighted average rate was at 5.31%, higher than 5.17% Wednesday. Money markets were shut Thursday for Gudi Padwa.

According to the latest data, the net liquidity absorbed by the RBI from the banking system was INR 168.75 billion Thursday, down from INR 273.97 billion Wednesday. Some banks may have begun GST payments in advance, dealers said, with banks' cash balances parked with the RBI similar over the past two days. Advance tax payments and payments for a state bond auction conducted Tuesday had already brought down the liquidity surplus in the banking system to a two-month low and it likely fell into a deficit Friday, dealers said. GST payments are likely to drain around INR 1.8 trillion by the banking system by Monday, most of which likely took place Friday, dealers said.

Banks' borrowing requirements in the money markets were high through the day after most gave the RBI's INR 750-billion, three-day variable rate repo auction a miss. The central bank accepted all bids worth INR 251.01 billion at the auction at a cut-off of 5.26%. Traders said that the triparty repo rate at the time the bidding ended at 1000 IST was lower than the repo rate, prompting banks to prefer the money market rather than the RBI window. As outflows began, lenders dwindled while borrowers piled up. The tri-party repo rate peaked at 5.51% intraday, its highest since Jan. 28.

"We don't know why 3-day VRR was not fully subscribed. We were expecting full subscription in this VRR," a dealer at a large public-sector bank said. "System liquidity is so low because of the outflow through advance tax payments followed by the heavy SDL (state government securities) of INR 580 billion earlier this week and GST outflow is also going on."

Some traders expected another VRR auction by the RBI through the day, which did not materialise. However, a majority of the market expects liquidity conditions to ease next week after GST outflows end and government spending kicks in near the end of the financial year on Mar. 31. In addition to short-term VRRs to manage overnight rates, traders also expect the RBI to conduct a VRR auction that crosses March-end and secures banks and primary dealerships easy funding until April. Banks are unlikely to be on the lending side next week due to heavy credit disbursals, dealers said.

OUTLOOK

The call money market is shut Saturday for Id-ul-Fitr. On Monday, the one-day call money rate is likely to open above the RBI's repo rate of 5.25% as outflows for goods and services tax payments continue. The call money rate is seen in a range of 4.75-5.50% 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 had expected an overnight VRR auction of up to INR 750 billion Monday to ease money market rates. After market hours, the RBI announced it would conduct an overnight, INR 1.00-trillion VRR auction.

CALL RATE

5.35%--Friday's close for three-day loans

5.40%--Friday's open for three-day loans

5.40%--Wednesday's close for two-day loans

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Above repo; TREPS rate near MSF as VRR not fully subscribed

MUMBAI--1305 IST--The three-day call money rate remained above the Reserve Bank of India's repo rate of 5.25%. The tri-party repo rate for three-day loans shot up to the Marginal Standing Facility rate of 5.50% due to an underwhelming response by market participants at the three-day variable rate repo auction for INR 750 billion at 0930-1000 IST, dealers said.

Deals in the tri-party repo market were struck for as low as 5.18% before 1000 IST, representing easier liquidity conditions that got distorted as banks began to deal with goods and services tax-linked outflows, dealers said. Some traders are now hoping the central bank will announce a VRR auction due to high rates in call and tri-party repo markets, while others said the RBI is unlikely to bail out banks with cheap lending after their miscalculation.

"TREPS (tri-party repo) rate was low at the time of VRR auction. So most banks did not participate and borrowed in TREPS," a dealer at a state-owned bank said.

The RBI took all INR 251.01-billion bids at 5.26% at Friday's three-day VRR auction for INR 750 billion at a cut-off and weighted average rate of 5.26%. Traders had expected full subcription, especially with GST payments worth around INR 1.8 trillion expected between Friday and Monday. The seven-day VRR auction on Tuesday was also undersubcribed, with banks choosing to borrow only INR 480.14 billion at the INR 1.50-trillion auction.

Since the outflows began after 1030 IST, even public sector banks were borrowing in the tri-party repo market to maintain their cash reserve ratio for three days as money markets will be shut on Saturday on account of Ramzan Id-ul-Fitr, dealers said. While some of the outflows would have usually taken place Saturday, the holiday has tightened the borrowing window and put more pressure on money market rates Friday.

The RBI announced VRR auctions this week to infuse transient liquidity into the banking system to reduce stress on overnight rates, with further short-term measures expected Monday before government spending adds to systemic liquidity. The proxy for liquidity surplus, which is the net liquidity absorbed by the RBI from the banking system, was INR 168.75 billion Thursday, sharply down from INR 273.97 billion Wednesday. The liquidity surplus remains the lowest since Jan. 22 and systemic liquidity likely fell into deficit Friday, dealers said. 

At 1305 IST, the tri-party repo rate for three-day loans was at 5.49%, sharply higher than the opening level of 5.18%. The call rate for three-day loans was at 5.30% while the weighted average rate was 5.38%, up sharply from 5.29% Wednesday. The weighted average rate in the tri-party repo market was 5.31%, up from 5.17%.      

For the day, the call rate is expected to be in a range of 5.00-5.55%. Dealers expect the tri-party repo rate to remain in the 5.40-5.50% band for the rest of the day, with trade volumes likely nearing INR 5 trillion, similar to Wednesday. Money markets were shut on Thursday for Gudi Padwa.  (J. Navya Sruthi and Durgesh Nandan)

India Call: Near RBI's MSF rate on low liquidity surplus, GST outflows

MUMBAI – The three-day interbank call rate was up and near the Reserve Bank of India's Marginal Standing Facility of 5.50% due to low liquidity surplus and outflows for goods and services tax payment, dealers said. They expect call and tri-party repo rate to remain on the higher side near the RBI's MSF rate due to firm demand for funds to meet borrowing requirements for three days and outflows for goods and services tax payments.

"Liquidity is almost steady and Thursday's liquidity may fall into deficit too," a dealer at a private bank said. "We also have 1.5 lakh (crore) (INR 1.5 trillion) outflows for GST today (Friday) so call rate can touch 5.45%," the dealer said.  

The proxy for liquidity surplus, which is the net liquidity absorbed by the RBI from the banking system, was INR 273.97 billion Wednesday, the lowest since Jan. 22. It was sharply down from INR 819.64 billion Tuesday. Liquidity surplus fell due to outflows for the state bond auction conducted on Tuesday. Most dealers expect the liquidity surplus to have turned into deficit for Thursday. Money markets were shut on Thursday on account of Gudhi Padwa. 

To support the liquidity in the banking system, the RBI conducted a three-day variable rate repo auction for INR 750 billion. According to an Informist poll, the median of estimates by eight participants for the cut-off at the auction was at 5.26%. Almost all participants were expecting a full subscription at the auction due to high rates in the call market and tri-party repo market. 

At 0954 IST, the three-day call rate was at 5.45%, up from 5.40% Wednesday for two-day loans. The weighted average call rate was at 5.41%, up sharply from 5.29% Wednesday. The weighted average rate in the tri-party repo market, where all Indian financial institutions can participate, was at 5.26%, up from 5.17%.       

Dealers expect the weighted average call rate to be around 5.30% for the day and the call rate is likely to rise to 5.50%. They also expect the tri-party repo rate to rise to a level of 5.40% during the day. Most dealers are expecting the RBI to conduct a VRR next week to support the banking system's liquidity after the outflows of INR 1.5 trillion to INR 1.8 trillion for GST payments. (J. Navya Sruthi)

End 

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

Edited by Akul Nishant Akhoury

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