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Informist, Wednesday, Mar. 25, 2026

By Durgesh Nandan

MUMBAI – The interbank call money rate for two-day loans ended above the Reserve Bank of India's repo rate of 5.25% on Wednesday as banks demanded funds due to increased credit offtake at the financial year-end and low liquidity surplus in the system, dealers said. Money markets will remain closed on Thursday due to Ram Navami.

The two-day call rate ended at 5.40% Wednesday, sharply up from 4.80% for one-day loans on Tuesday. The weighted average rate was 5.30%, marginally lower than 5.32% Tuesday. The weighted average rate in the larger tri-party repo market was at 5.22%, up from 5.14% Tuesday.

According to the latest data, the net liquidity absorbed by the RBI, a proxy for liquidity surplus, was at INR 616.29 billion Tuesday, up from INR 261.96 billion Monday. There were inflows from mutual funds and foreign portfolio investment, which eased the liquidity in the system. "... the liquidity will gradually increase as government spending is also scheduled for the next week," a dealer at a public sector bank said. Government inflows to the tune of around INR 1.6 trillion to INR 2 trillion are expected next week, dealers said. 

Dealers expect the call rate to rise next week, but it will not cross the Marginal Standing Facility rate of 5.50%, they said. RBI will conduct a six-day variable rate repo auction Friday for INR 750 billion and a three-day auction for INR 500 billion on Monday. RBI has conducted four variable rate repo auctions this fortnight. 

OUTLOOK
On Friday, the three-day call money rate is likely to open above the RBI's repo rate of 5.25% due to demand for funds in early trade. The three-day call money rate is seen in the 5.00-5.25% range throughout the day, as dealers expect inflows from variable-rate repo to ease system liquidity. Money markets are closed on Thursday due to Ram Navami. 

Dealers said systemic liquidity is expected to return to a comfortable surplus by Monday. A three-day variable rate repo is scheduled for Monday, which is likely to ease the call rate. Government spending is expected to hit the banking system next week in the form of salaries and pensions.

CALL RATE

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

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

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

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Rises on firm demand for funds to meet two-day borrowing needs

MUMBAI – The interbank call money rate for two-day loans rose sharply Wednesday due to firm demand for funds from primary dealerships to meet two-day borrowing requirements, dealers said. Money markets will be shut Thursday on account of Shree Ram Navami.

The call rate opened above the Reserve Bank of India's repo rate of 5.25% for the sixth consecutive session as there was also demand for funds to meet the year-end credit disbursements demand, a dealer at a public sector bank said. "... Banks need money for credit disbursement, which is expected to happen on Friday and Monday," the dealer said.

At 1023 IST, the two-day call rate was 5.40%, sharply up from 4.80% for one-day loans Tuesday. The weighted average call rate was 5.40%, up from 5.32% Tuesday. The tri-party repo rate was at 5.17%. The weighted average rate in the tri-party repo market, where all Indian financial institutions participate, was 5.22%, up from 5.14% Tuesday. Dealers expect the call rate to remain at 5.40-5.45% and it is unlikely to rise above the Marginal Standing Facility rate of 5.50% Wednesday. 

The net liquidity absorbed by the RBI, a proxy for liquidity surplus, was at INR 616.29 billion Tuesday, up from INR 261.96 billion Monday. Liquidity surplus rose as banks reduced their cash balances with the RBI after building up product earlier in the ongoing fortnight ending on Tuesday, dealers said. There were also inflows of INR 22.35 billion Tuesday on account of a coupon payment on state government bonds.   

Although the liquidity surplus rose slightly, money market rates remained firm as the systemic liquidity was still below the comfortable level of INR 1 trillion. "We expect that liquidity conditions may tighten further, and the call rate could move closer to or even above the MSF rate by Mar. 30. (Monday) as this is the end of the financial year," a dealer at a private sector bank said.

In order to provide daily support for the banking system at the end of the financial year, the RBI Tuesday said it will infuse transient liquidity through two variable rate repo auctions. It will conduct a six-day VRR auction for INR 750 billion Friday and a three-day VRR auction for INR 500 billion Monday. So far this fortnight, the RBI has infused INR 2.08 trillion of transient liquidity through four VRR auctions, of which only INR 558.37 billion infused through a three-day VRR auction Tuesday is currently in the banking system. (Durgesh Nandan)

End

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

With inputs from Shumaila Firoz
 

Edited by Saji George Titus

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