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Informist, Monday, Mar. 23, 2026

By Durgesh Nandan

MUMBAI - The one-day interbank call money rate ended at the Reserve Bank of India's repo rate of 5.25% due to demand for funds from banks amid outflows for goods and services tax payments, dealers said. There was liquidity deficit in the banking system after the payments of goods and services tax outflows and advance tax payments over the past week. The outflows for GST payments totalled around INR 1.8 trillion between Friday and Monday, with no major outflows scheduled until the end of the quarter and financial year on Mar. 31.

The one-day call rate ended at 5.25%, down from 5.35% for three-day loans Friday. The weighted average rate was at 5.30%, lower from 5.34% Friday. The tri-party market's weighted average rate was at 5.18%, lower than 5.31% Friday. Money markets were shut Saturday for Ramzan Id-ul-Fitr.

According to the latest data, the net liquidity injected by the RBI into the banking system--a proxy for the systemic liquidity deficit--was INR 653.96 billion Sunday, down from INR 659.36 billion Saturday. The latter was the highest deficit since Dec. 29. This is likely to widen Monday after the completion of outflows for tax payments and due to the variable rate repo auction garnering a higher subscription than the rollover, dealers said.

However, the overnight VRR auction for INR 1 trillion that the RBI conducted Monday was still undersubscribed. The central bank accepted all bids worth INR 792.56 billion at the auction at the minimum cut-off rate of 5.26%. Dealers said Monday's INR-792.56-billion VRR auction was not fully subscribed as the call rate was lower than 5.26% when the auction was being conducted.

However, banks' requirements for funds to maintain daily cash balances with the RBI for regulatory requirements have increased due to the overall liquidity slipping into deficit, dealers said. Without further VRR auctions this week, traders expect the call money rate to rise above the Marginal Standing Facility rate of 5.50%. Traders said government's month-end spending for salaries and pensions is likely to offset some of the liquidity crunch by the end of the month, especially since there is a paucity of lenders in the money markets at that time, dealers said.

"Banks do not have enough securities to lend as they are locked in other segments so banks were unable to borrow in VRR," a dealer at a public-sector bank said. "We are expecting another overnight or two-three-day VRR either on Wednesday or Friday of around 75 thousand crores (INR 750 billion) to one lakh crore (INR 1 trillion)." 

OUTLOOK
On Tuesday, the one-day call money rate is likely to open above the RBI's repo rate of 5.25% due to liquidity deficit in the banking system after payments for goods and services tax. The one-day call money rate is seen in a range of 4.65-5.45% throughout the day.

Traders expect more liquidity infusion measures from the RBI support credit growth and banks' demand for funds near the quarter- and financial year-end next week, dealers said. Traders had expected an overnight VRR auction of around INR 500 billion to INR 750 billion this week to ease money market rates. After market hours, the RBI announced a three-day VRR auction worth INR 1 trillion Tuesday. Monday's overnight VRR auction with INR 792.56 billion of accepted bids will reverse Tuesday. 

CALL RATE

5.25%--Monday's close for one-day loans

5.40%--Monday's open for one-day loans

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

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call:Above repo on firm demand for funds; liquidity turns into deficit

MUMBAI – The interbank call money rate for one-day loans rose Monday due to firm demand for funds and liquidity deficit in the banking system. The call rate and the tri-party repo rate were above the Reserve Bank of India's repo rate of 5.25%. 

At 1017 IST, the one-day call rate was 5.45%, up from 5.35% for three-day loans Friday. The weighted average call rate was 5.40%, up from 5.34% Friday. The weighted average rate in the tri-party repo market where all Indian financial institutions can participate was at 5.29%, down from 5.31% Friday. The tri-party repo rate was at 5.33%.  

The liquidity deficit in the banking system, which is the net liquidity injected by the RBI, was INR 62.26 billion on Friday, compared to the net liquidity absorbed at INR 168.75 billion Thursday. The systemic liquidity turned into a deficit for the first time since Jan. 21 and was at the highest since Jan. 8. Dealers expect the liquidity deficit to widen further over the weekend and Monday due to outflows for goods and services tax payment.   

"Banks have debited GST from companies but the system outflows (for GST payments) will be seen today (Monday)," a dealer at a state-owned bank said. But a few dealers said the outflows for GST payments started on Friday and a small amount of the total outflows is expected Monday. Market participants expect INR 1.8 trillion to INR 2 trillion outflows for GST payment from the system.   

A dealer at a private bank said the RBI is likely to announce another variable rate repo auction for INR 500 billion this week due to deficit liquidity in the banking system. The RBI may conduct another VRR on Friday or Mar. 30, a dealer said. 

At Monday's overnight VRR auction for INR 1 trillion, which was the third auction by the RBI this fortnight, the RBI took all INR 792.56-billion bids. At Friday's three-day VRR auction for INR 750 billion, the central bank took all INR 251.01-billion bids.  (J. Navya Sruthi)  End

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

With inputs from J. Navya Shruti and Shumaila Firoz
Edited by Akul Nishant Akhoury
 

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