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Informist, Monday, Mar. 30, 2026

By Durgesh Nandan

MUMBAI – The interbank call money rate for three-day loans ended at its highest level in a decade and also sharply above the Reserve Bank of India's Marginal Standing Facility rate of 5.50% Monday due to quarter-end and year-end demand for funds, dealers said. Demand for funds to maintain the Cash Reserve Ratio, credit disbursals, and the three-day tenure owing to holidays raised the rate, a dealer at a public sector bank said. The call money market will remain closed on Tuesday for Mahavir Jayanti and on Wednesday for banks' annual account closing for the financial year ending Mar.31.

The three-day call rate ended at 7.00% Monday, sharply up from 5.50% for three-day loans Friday. The weighted average call rate was 6.90%, the highest since Apr. 2, 2023 and sharply up from 5.46% Friday. "Call rates were high today because of the year-end and March-end (quarter end) pressure for fund requirements, but rates cooled down after two VRRs, today (Monday) volume in call money market was less compared to other days due to the higher rate so TREPs (tri-party repo market) was the preferred market today," a dealer at another public sector bank said.

The larger tri-party repo market rate closed at 5.09%. The weighted average rate in the tri-party repo market was 6.16%, up from 5.44% Friday. Mutual funds were also facing redemption pressure and this added to the pressure on the rates, dealers said. 

As per the latest data from the RBI, the liquidity surplus in the banking system was INR 1.27 trillion Sunday, unchanged from Saturday. Liquidity in the system increased through the variable-rate repo auctions conducted last week, a dealer at another public-sector bank said. The central bank has so far infused INR 3.59 trillion in temporary liquidity through seven VRR auctions this fortnight.

The RBI conducted two three-day variable rate repo auctions for INR 500 billion Monday. The first VRR was oversubscribed and the RBI took all the bids worth INR 500.01 billion at a weighted average rate of 5.44%. The second auction was undersubscribed despite high call and tri-party repo rates. The RBI accepted all bids worth INR 345.81 billion, against the notified amount of INR 500 billion.  The second VRR auction was undersubscribed because many participants did not have excess Statutory Liquidity Ratio securities to offer. This pressured banks to borrow from the call market despite higher rates, a dealer at a private-sector bank said.

"Rates were high even after the VRR (auction) because banks were holding their amount till late, but after the two VRRs, demand for funds decreased, so banks started squaring off their positions in the market, as today (Monday), they also have to maintain the Cash Reserve Ratio. That's why rates fell in the evening," a dealer at a public sector bank said, referring to the end of the year being the last date for the current cycle of maintaining reserves.

OUTLOOK
Thursday, the four-day call money rate is likely to open near the RBI's MSF rate of 5.50% as inflows from government spending are expected Monday and Tuesday. The four-day call money rate is seen in the 5.40-5.50% range during the day, as dealers expect ample liquidity will bring rates down. Thursday will be the first working day for FY27. Friday is a holiday for Good Friday.

Dealers said systemic liquidity is expected to return to a comfortable surplus later in the week. Three of the RBI's variable-rate repos will be reversed Thursday, resulting in an outflow of INR 1.5 billion.  

CALL RATE

7.00%--Monday close for three-day loans

6.85%--Monday open for three-day loans

5.50%--Friday close for three-day loans

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Weighted avg rate near 7% on firm demand to meet year-end needs

MUMBAI – The interbank call money rate for three-day loans remained sharply above the Reserve Bank of India's Marginal Standing Facility rate of 5.50% despite two three-day variable rate repo auctions during the day due to firm demand for funds to meet the year-end and fortnight-end requirements. Even as the rate cooled to 4.99% by 1720 IST, the weighted average rate for Monday was 6.90%. The tri-party repo rate was also sharply above the MSF rate as most mutual funds were facing month-end redemption pressure, dealers said.

The central bank's move to curb speculative positions in the domestic currency also increased demand for rupee liquidity. The RBI on Friday directed banks to ensure that net open rupee positions in the onshore deliverable foreign exchange market do not exceed $100 ‌million at the end of each business day by Apr. 10, dealers said. 

"There is forward premium arbitrage, low liquidity surplus, year-end credit (disbursal) demand, redemption pressure, and build-up for credit offtake. These are all the reasons for high rates in money markets," a dealer at a large state-owned bank said. The dealer said there was firm demand for funds in the tri-party repo market as market participants were taking advantage of arbitrage between the tri-party repo rate and cash-tom market. The cash-tom rate, the shortest-tenure foreign exchange swap, rose to 10.30% Monday from 2.63% Friday. The rate usually surges for transactions with the near-leg on the last day of the financial year and the far leg on the first day of the next financial year.
 

Most mutual funds have been facing month-end redemption pressure from individuals and companies since late last week, leading to fewer lenders and higher rates in the tri-party repo market. A few mutual funds were also lending at higher rates in the tri-party repo market, taking advantage of the current liquidity scenario and year-end demand for credit disbursements, dealers said.

At 1441 IST, the three-day call rate rose to the day's high of 7.10%, sharply up from the close of 5.50% for such loans Friday. The weighted-average call rate was 6.95%, up from 5.46% on Friday. The weighted average rate in the tri-party repo market was at 6.37%, 93 basis points higher than the previous day. The rates remained higher even after the RBI conducted two variable-rate repo auctions of INR 500 billion each to cool rates. 

In the first auction, conducted between 0930 IST and 1000 IST, the RBI received bids for INR 572.87 billion but took INR 500.01 billion at a cut-off rate of 5.34%. The weighted average rate was 5.44% at the auction. In the second three-day VRR auction for INR 500 billion, the RBI accepted all INR 345.81 billion bids at a cut-off of 5.26%. The weighted average rate was 5.30% at the second three-day VRR auction.    

Despite higher rates in the overnight markets, the second VRR auction was not fully subscribed, as banks also need to maintain their Statutory Liquidity Ratio positions for the closing of the year-end books. Banks have to park these securities, largely government bonds, with the RBI to borrow money at the VRR auctions.  "After (INR) 5 trillion OMOs (open market operations auction) and on-screen buys by RBI frequently, I don't think banks will have enough securities left to borrow at VRR," a dealer at another state-owned bank said.       

The dealer said that inflows from the government's month-end spending on salaries and pensions can pull down money market rates. A few dealers said around INR 500 billion inflows are expected on Monday for government spending, while some said these inflows will be seen only from Wednesday after the year-end. 

The RBI has conducted seven VRR auctions of varying tenures and infused INR 3.58 trillion of transient liquidity into the banking system so far this fortnight, with just nine working days. The net liquidity absorbed from the banking system by the RBI – a proxy for the liquidity surplus – was INR 1.27 trillion Sunday, similar to Saturday and up from INR 1.14 trillion Friday. (J. Navya Sruthi and Durgesh Nandan)  

India Call: Sharply above RBI MSF rate; banks borrow for year-end disbursals

MUMBAI – The interbank call money rate for three-day loans was sharply above the Reserve Bank of India's Marginal Standing Facility rate of 5.50% due to firm demand for funds ahead of the financial year-end, dealers said. They expect the call rate to remain high throughout the day due to year-end demand for funds for disbursement of loans by banks. The money market will be shut on Tuesday on account of Mahavir Jayanti and on Wednesday due to banks' annual closing of accounts. 

At 1004 IST, the three-day call rate was 6.85%, sharply higher than 5.50% for three-day loans Friday and the weighted average call rate was 6.85%, sharply higher than 5.46% Friday. The call rate opened at 6.85%, its highest opening since Jan. 13, 2025. "Call rate is expected to be in the range of 5.55–5.60% as today (Monday) is the annual closing (last working day) so banks need enough money to fulfil their credit disbursement requirements," a dealer at a public sector bank said.

The tri-party repo rate was 6.77%, the second time this month it has opened above the MSF rate. The weighted average call rate was 6.48%, sharply higher than 5.46% Friday. The tri-party repo rate opened at the RBI's MSF rate for the first time in the last two months as there were more borrowers in the market to meet the financial year-end demand for funds, a dealer at another public sector bank said. 

The net liquidity absorbed by the RBI, an indication of the liquidity surplus, was INR 1.14 trillion Friday, sharply higher than INR 487 billion Thursday. The payment for INR 400 billion of state government bonds is scheduled Monday, which will drain liquidity. Dealers expect government spending of INR 1.5 trillion to INR 2 trillion on Monday, which will ease the year-end pressure.

The RBI infused INR 500 billion through a three-day variable rate repo auction Monday, the sixth auction this fortnight. The central bank has so far infused INR 3.24 trillion in temporary liquidity through six VRR auctions this fortnight. (Durgesh Nandan)

End

End

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

Edited by Saji George Titus

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