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Informist, Tuesday, Mar. 24, 2026

 

By Durgesh Nandan 

 

MUMBAI – For the first time this fortnight, the interbank call money rate for one-day loans ended below the Reserve Bank of India's Standing Deposit Facility rate of 5.00% on Tuesday as banks met demand for funds earlier in the day, dealers said. However, dealers expect rates to rise above the repo rate this week because banks need funds for credit outflows, as the quarter and financial year will end on Mar. 31, so banks will lend more to improve their balance sheet, dealers said. 

 

The one-day call rate ended at 4.80% Tuesday, down from 5.25% Monday. The weighted average rate was at 5.32%, higher from 5.30% Monday. The weighted average rate in the larger tri-party repo market was at 5.14%, lower than 5.18% Monday. 

 

According to the latest data, the net liquidity absorbed by the RBI from the banking system -- a proxy for the liquidity surplus --  was INR 261.96 billion Monday, compared to a deficit of INR 653.96 billion Sunday. Liquidity in the banking system turned into a surplus Monday due to early government spending after tax outflows over the past week, along with state bond redemptions and coupon payments of over INR 110 billion. 

In order to provide ample liquidity to the banking system at the end of the financial year, the RBI said it will conduct two variable rate repo auctions. A six-day auction for INR 750 billion will be conducted between 0930 IST and 1000 IST on Friday. The central bank will also conduct a three-day VRR auction for INR 500 billion between 0930 IST and 1000 IST on Monday. "As the year-end pressure is building up, if the RBI does not conduct any additional liquidity operations, there is a possibility that overnight rates could move higher and even test the MSF (Marginal Standing Facility rate of 5.50%)", a dealer at a private sector bank said. 

 

At the three-day variable repo rate auction for INR 1 trillion Tuesday, the central bank took all the bids worth INR 558.37 billion. The variable repo rate auction was undersubscribed despite low liquidity surplus in the banking system as rates in the tri-party repo market and CROMs (Clearcorp Repo Order Matching System) market were lower than 5.26% when the auction was being conducted. 

OUTLOOK
On Wednesday, the two-day call money rate is likely to open above the RBI's repo rate of 5.25% due to demand for funds. The two-day call money rate is seen in a range of 5.35-5.45% throughout the day. Money markets are shut on Thursday on account of Ram Navami. 

 

Dealers said systemic liquidity is seen returning to a comfortable surplus by Monday as the government spending is expected to hit the system in the form of salary and pensions next week. Traders also expect liquidity infusion measures from the RBI to support credit growth and banks' demand for funds near the quarter and financial year-end next week. 

 

"We expect liquidity to be in a comfortable position by Monday. It will be near 1 trillion (INR 1 trillion) as the government is likely to spend some money in the form of salary and pensions," a dealer at a public sector bank said.

 

CALL RATE

4.80%--Tuesday's close for one-day loans

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

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

 

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

 

TENURE	TUESDAY	MONDAY
Overnight	5.39	5.38
3-day	--	--
14-day	7.01	6.94
1-month	7.13	7.07
3-month	7.18	7.13

---

India Call: Rises on demand for funds, near RBI's MSF on low liquidity

 

MUMBAI – The interbank call money rate for one-day loans rose Tuesday due to firm demand for funds and low liquidity surplus in the banking system. The Reserve Bank of India conducted a three-day variable rate repo Tuesday for INR 1 trillion to support banking system liquidity and cap the call rate. This is the fourth VRR auction this fortnight.  

 

At 0948 IST, the one-day call rate was 5.40%, up from 5.25% for one-day loans Monday. The weighted average call rate was 5.40%, up from 5.30% Monday. The tri-party repo rate was at 5.26%. The weighted average rate in the tri-party repo market where all Indian financial institutions participate was 5.28%, up from 5.18% Monday.  

 

"This is a three-day VRR (Tuesday's VRR) so we can't see much subscription. Banks do not want to block their securities for three days now," a dealer at a public sector bank said. According to the median of 11 participants in an Informist poll, the RBI is likely to set a cut-off at 5.26% at Tuesday's VRR auction for INR 1 trillion. The subscription is seen at INR 750 billion.  

 

Liquidity in the banking system turned into a surplus Monday due to early government spending and maturity of oil bonds. The net liquidity absorbed by the RBI, a proxy for liquidity surplus, was at INR 261.96 billion compared to a deficit of INR 653.96 billion Sunday. "There was also a maturity of an oil bond yesterday (Monday). We received (INR) 1200 cr (INR 12 billion) on it. There could be around 80k crores (INR 800 billion) of inflows from early government spending and oil bond maturity," the dealer at the public sector bank said.

 

A few dealers expect another VRR auction this month before the end of the current fortnight to support the banking system's liquidity. "We expect another overnight VRR as the liquidity is still so low in the system of around 50 thousand crores (INR 500 billion) to one lakh crore (INR 1 trillion) next week as that's only working day left in the next week," a dealer at a public sector bank said. (Durgesh Nandan)

 

End

 

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

Edited by Deepshikha Bhardwaj

 

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