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Informist, Monday, Apr. 6, 2026

By Durgesh Nandan

MUMBAI – The interbank call money rate for one-day loans ended at its lowest level in over three weeks because of a large liquidity surplus in the banking system. The call rate also ended below the Reserve Bank of India's standing deposit facility rate of 5.00% on weaker demand for funds in the first half of the reporting fortnight, because of which there was no rush among banks to meet funding requirements, dealers said.

The one-day call rate ended at 4.75% Monday, the lowest closing level for the most-traded tenure since Mar. 12, down from 4.99% for two-day loans Saturday. However, the weighted average call rate was 5.08%, up from 4.78% Saturday. The larger tri-party repo market rate closed at 5.00%. The weighted average rate in the tri-party repo market was 4.78%, up from 4.38% Saturday.

Volumes in the call and tri-party repo markets were similar to the weekday average despite the liquidity surplus as primary dealers borrowed to meet daily cash requirements. Trade volume in the call money market was INR 203.58 billion. The volume in the tri-party repo market was INR 4.14 trillion. 

"It (call rate) ended lower due to a liquidity surplus, March pressure has cooled down, reporting Friday has enough time left," a dealer at a public-sector bank said. "Also, whatever transaction is going on in the market is likely because of higher TDR (term deposit ratio) rates at which banks kept the money last quarter to show increase in their balance sheet, so now they are borrowing the money from overnight market to stabilise the higher TDR rates."

The net liquidity absorbed by the RBI, an indication of the liquidity surplus, was INR 3.68 trillion Sunday, lower than INR 3.72 trillion Saturday but higher than INR 3.48 trillion Friday. Saturday's net amount was the largest liquidity surplus in the banking system since Aug. 6. The liquidity surplus has risen because of month-end government spending for salary and pensions, along with government funds released by different ministries which were unused being infused back into the banking system, a dealer at a large public-sector bank said.

Most traders said they have not seen any impact of the loosening of the RBI's liquidity coverage ratio norms and curbs on foreign exchange derivative trade on rupee liquidity or money market rates yet. The central bank had restricted authorised dealers from holding onshore net open positions of more than $100 million at the end of the day from Apr. 10, besides barring dealers offering clients non-deliverable derivative contracts involving the rupee. While dollar liquidity has improved, since the liquidity is being churned among banks, no fresh rupee liquidity is coming into the system, dealers said. 

Meanwhile, changes to the weightage of calculating high-quality liquid assets laid out last year have improved banks' liquidity coverage ratio by around 6 percentage points, according to an RBI estimate. A dealer at a private-sector bank attributed INR 200 billion to INR 500 billion of improved liquidity to the move, though others said there had been no impact.

OUTLOOK

Tuesday, the one-day call money rate is likely to open below the RBI's repo rate of 5.25% due to sufficient liquidity in the banking system. The one-day call money rate is seen in the 4.50–5.20% range during the day, as dealers expect ample liquidity and lower demand will bring rates down later in the day.

Outflows for excise duty and tax deducted at source payments will drain between INR 500 billion and INR 700 billion from banking system liquidity. However, the call and tri-party repo rates are unlikely to rise above the repo rate, given the comfortable liquidity in the system, dealers said. 

CALL RATE

4.75%--Monday's close for one-day loans

5.15%--Monday's open for one-day loans

4.99%--Saturday's close for two-day loans

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Below RBI's SDF rate on low demand, hefty liquidity surplus

MUMBAI – The interbank call money rate for one-day loans fell below the Reserve Bank of India's standing deposit facility rate of 5.00% due to lower demand for funds and excessive liquidity surplus in the banking system, dealers said. The call rate is expected to close around the RBI's SDF rate, a dealer at a private-sector bank said.

The tri-party repo rate ended at 5.00% at 1600 IST, sharply up from 2.00% Saturday. The weighted average rate in the tri-party repo market was 4.78%, up from 4.38% on the previous day. At 1600 IST, the one-day call rate was 5.00%, up from the close of 4.99% two-day loans on Saturday. The weighted-average call rate was 5.09%, down from 5.15% earlier in the day.

The tri-party repo rate closed at RBI's SDF rate due to weak demand for funds as the liquidity surplus remained near an eight-month high, dealers said. The net liquidity absorbed by the RBI, a proxy for liquidity surplus in the system, was INR 3.68 trillion Sunday, lower than INR 3.72 trillion Saturday but higher than INR 3.48 trillion Friday. Saturday's number was the highest liquidity surplus in the banking system since Aug. 6.

The liquidity surplus rose because of the government's month-end spending of INR 1 trillion to INR 1.5 trillion. Excise duty outflows of INR 500 billion to 700 billion are scheduled for Tuesday. This outflow will not have any major impact on the liquidity, a dealer at a public-sector bank said.

Updated liquidity coverage ratio norms, which came into effect Wednesday, didn't affect the systemic liquidity in the banking system, dealers said. Traders also did not see much immediate impact on rupee liquidity from the RBI directive capping net open positions in the rupee in the onshore foreign exchange market at $100 million at the end of each business day by Apr. 10.

"We didn't see much significant impact of the Reserve Bank of India's directive capping net open positions in the onshore FX market on the liquidity," a dealer at another private-sector bank said. "The rupee has seen some support, though much of the move is notional in nature."

Volumes in the call and tri-party repo markets were similar to the weekday average despite the liquidity surplus, as primary dealers borrowed to meet daily cash requirements. At 1718 IST, trade volume in the call money market was INR 202.95 billion. The tri-party repo market ended with INR 4.14 trillion of volume.  (Durgesh Nandan and Shumaila Firoz)

India Call: Up on early demand for funds, seen down on comfortable liquidity
 

MUMBAI – The interbank call money rate for one-day loans was up due to early demand for funds from primary dealerships, dealers said. However, the rate was below the Reserve Bank of India's repo rate of 5.25% due to a comfortable liquidity surplus and weaker demand for funds in the market, dealers said. The tri-party repo rate opened at RBI's Standing Deposit Facility rate of 5.00% due to lower demand for funds, dealers said.

At 0954 IST, the one-day call rate was 5.15%, sharply higher than 4.99% for two-day loans on Saturday. The weighted average call rate was at 5.15%, higher than 4.78% on Saturday. The tri-party repo rate was 4.79% and the weighted average rate was 4.87%, higher than 4.38% Saturday. "Call rate is expected to remain below the repo rate throughout the day, and it could go to the 4.50% level also during the day as there is surplus liquidity in the system and banks don't require funds," a dealer said.

The net liquidity absorbed by the RBI, an indication of the liquidity surplus, was INR 3.6 trillion Thursday, higher than INR 1.85 trillion Wednesday. Liquidity surplus rose to the highest level since Aug. 6, likely because of the government's month-end spending of INR 1 trillion to INR 1.5 trillion. Dealers also said more inflows from the government are expected for pensions while no major outflows are scheduled for this week.

Banks are not expecting any cut in policy rates at the RBI's Monetary Policy Committee meeting, which will be the first meeting of financial year 2026-27 (Apr-Mar) from Monday to Wednesday. "...the condition of the market is okay, so we think the RBI will wait and watch," 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 Rajeev Pai

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