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Informist, Friday, Mar. 27, 2026

By Durgesh Nandan

MUMBAI – The interbank call money rate for three-day loans ended at Reserve Bank of India's Marginal Standing facility rate of 5.50% on Friday due to tight liquidity conditions and demand for funds to meet year-end requirements, dealers said. Banks borrowed to meet their credit disbursement demands for the quarter-end and the financial year 2025-26 (Apr-Mar) end requirements, dealers said.

The three-day call rate ended at 5.50% Friday, up from 5.40% for two-day loans on Wednesday. The weighted average rate was 5.46%, up from 5.30% Wednesday. The weighted average rate in the larger tri-party repo market was at 5.44%, up from 5.22% Wednesday. Call rates were higher Friday as banks needed more funds to raise their credit disbursements to bulk up their balance sheet before the financial year-end, dealers said.

As per the latest data from the RBI, the liquidity surplus in the banking system was at INR 487.00 billion Thursday, slightly up from INR 432.17 billion Wednesday. The liquidity rose slightly because banks reduced their cash reserves with the RBI to INR 7.80 trillion Thursday from INR 7.87 trillion Wednesday. "We expected the liquidity (surplus) to get back to a comfortable position of around 1 lakh crore (INR 1 trillion) by mid-April," a dealer at a public sector bank said.

The variable rate repo auction conducted by the RBI was not fully subscribed because banks didn't want to lend their securities as they have to maintain their Statutory Liquidity Ratio requirements, dealers said. Banks have already sold or lent INR 5 trillion of securities through open market operation auctions and VRRs, leaving them with limited securities, a dealer at a large public sector bank said. At the six-day VRR Friday, only INR 653.22 billion was subscribed as against the notitied amount of INR 750 billion. RBI accepted all the bids at the cut-off rate of 5.26% and a weighted average rate of 5.29%. 

Government spending is expected to start from Monday, which is likely to ease the liquidity crunch in the system, dealers said. A few dealers also said that the spending has already started, but bulk transactions will take place on Monday. 

The RBI will conduct a three-day VRR, the sixth auction of this fortnight, for INR 500 billion on Monday to infuse more liquidity into the banking system and ease financial year-end pressure. The central bank has infused INR 2.74 trillion in temporary liquidity through five VRR auctions so far this fortnight.

OUTLOOK
On Monday, the one-day call money rate is likely to open near the RBI's MSF rate of 5.50% due to banks' demand for funds to meet quarter-end requirements. The one-day call money rate is seen in the 5.40-5.80% range during the day, as dealers expect year-end pressure to keep the rates higher. Monday will be the last working day for FY26. The call money market will remain closed on Tuesday due to Mahavir Jayanti. 

Dealers said systemic liquidity is expected to return to a comfortable surplus by mid-April. Government spending is expected to hit the banking system next week in the form of salaries and pensions.  Settlement of the state government's securities for INR 400 billion is scheduled for Monday, which will drain liquidity.

CALL RATE

5.50--Friday's close for three-day loans

5.50%--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 MSF rate as VRR not fully sold, year-end demand for funds

MUMBAI – The three-day call money rate remained above the Reserve Bank of India's Marginal Standing Facility rate of 5.50% due to firm demand for funds ahead of year-end to meet credit disbursement targets. The call rate and tri-party repo rate remained near the RBI's MSF rate throughout the day due to a low liquidity surplus and because Friday's six-day variable rate repo auction was not fully subscribed. 

The six-day VRR auction was under-subscribed despite higher call and tri-party repo rates, as banks did not have sufficient securities. Banks prefer to borrow in the overnight market rather than in the VRR auction, as the overnight market is unsecured, a dealer at a small finance bank said.

Market participants were expecting bids of at least INR 800 billion for Friday's six-day VRR, which was set at INR 750 billion, due to firm rates in the overnight market at the time of the auction. But the RBI received only INR 653.22 billion in bids at the auction and accepted all bids at a cut-off rate of 5.26% and a weighted average rate of 5.29%. This has kept rates on the higher side of the liquidity adjustment facility corridor after the auction. 

The tri-party repo rate was also high due to month-end redemption pressure on mutual funds, a dealer at a state-owned bank said. Most mutual funds are also selling securities and lending at higher rates in the overnight market, the dealer said.

At 1515 IST, the call rate for three-day loans was at 5.60%, up from 5.40% for two-day loans on Wednesday, while the weighted average rate was 5.50%. The weighted average rate in the tri-party repo market was 5.47%, up from 5.22%. Money markets were shut on Thursday for Ram Navami.

As per the latest data by the RBI, liquidity surplus in the banking system was INR 487.00 billion Thursday, slightly up from INR 432.17 billion Wednesday. The liquidity rose slightly because banks reduced their cash reserves with the RBI to INR 7.80 trillion Thursday from INR 7.87 trillion Wednesday. 

To provide support to the banking system's liquidity during the financial year-end period, the RBI will conduct a three-day VRR, the sixth auction for this fortnight, for INR 500 billion on Monday. The central bank infused temporary liquidity of INR 2.74 trillion through five VRR auctions so far this fortnight. (Durgesh Nandan, Shumaila Firoz, and J. Navya Sruthi) 

India Call: Above RBI's MSF rate to meet year-end borrowing requirements

MUMBAI – The interbank call money rate for three-day loans was above the Reserve Bank of India's Marginal Standing Facility rate of 5.50% due to firm demand for funds ahead of the year-end, dealers said. They expect call the rate to remain on the higher side of the liquidity adjustment facility corridor throughout the day due to low liquidity in the banking system. 

At 0943 IST, the three-day call rate was 5.60%, the highest since Feb. 4 and up from 5.40% for two-day loans on Wednesday. The weighted average call rate was 5.52%, up from 5.30% Wednesday. The tri-party repo rate, in which all Indian financial institutions are allowed to participate, was at 5.46% and the weighted average rate at 5.42%, up from 5.22% Wednesday.

The call money rate opened at the RBI's MSF rate for the first time in the last two months due to more borrowers in the market to meet the financial year-end demand for funds, a dealer at a public sector bank said. 

The movement of the call rate for the day depends on the RBI's six-day VRR auction Friday. "If the VRR will be fully subscribed, then it (call rate) is expected to be in the range of 5.25%–5.30%," a dealer at a public sector bank said. A few dealers also expect the call rate to remain at the RBI's MSF rate.  

The net liquidity absorbed by the RBI, a proxy for liquidity surplus, was at INR 432.17 billion Wednesday, down from INR 616.29 billion Tuesday. The liquidity surplus fell as banks increased their cash balances with the RBI to INR 7.87 trillion Wednesday from INR 7.65 trillion on Tuesday.

The RBI took all INR 653.22 billion bids at the six-day VRR auction for INR 750 billion on Friday, and set a cut-off of 5.26%. The weighted average rate at the auction was at 5.29%.(Durgesh Nandan)  End

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

Edited by Saji George Titus

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